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Pure TV

28 September 2015 By Jennifer Saba

Viewer ratings haven’t been so great for America’s fall TV lineup. Perhaps the best drama is playing out in the boardrooms of U.S. broadcasters. The latest scene involves Nexstar Broadcasting, which went public on Monday with an offer to buy rival Media General for $4.1 billion. That would break up the latter company’s agreement to buy Meredith, a publisher and local TV station owner. Nexstar’s hostile merger makes more sense.

Media General struck its $3.1 billion deal with Meredith earlier this month. The combination would be the No. 3 owner of U.S. local TV stations and bring an expected $60 million in annual cost savings. But Meredith’s stable of magazines like Family Circle and Better Homes and Gardens would be a stumbling block. Getting back into the persistently declining print business would be a retrograde step for Media General, which previously offloaded its newspapers to focus on broadcasting.

If Nexstar manages to nab Media General, it will be a lot closer to a pure local TV proposition. The two companies together would go into the No. 2 slot nationwide. And Nexstar is calling for potential cost cuts of $75 million a year, while also arguing that its preferred deal would involve less chunky divestments.

Nexstar’s cash and stock offer, valued at $14.50 per Media General share, is also at a 30 percent premium to Friday’s closing price. Shareholders with any misgivings at all about the future of TV, Media General’s management or the Meredith deal might find that appealing.

What’s odd is that Media General’s directors don’t seem to have taken Nexstar seriously. The Irving, Texas-based company says it originally approached its quarry in early August. The price on the table then was $17 a share, though media stocks have taken a beating since. The offer was rebuffed.

Consolidation in local TV makes sense to get more leverage with advertisers and distributors. Media General looks like a better fit with Nexstar than with Meredith. Executives and boards aren’t fond of unwinding agreed deals or succumbing to hostile ones. Nexstar, though, has enough material to script a must-see cat fight worthy of Dallas.

 

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