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Breaking: Nexstar reaches agreement to purchase Tribune

Discussion pertaining to Grand Rapids, Kalamazoo, Muskegon, Battle Creek, Big Rapids, and Michiana
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MWmetalhead
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Breaking: Nexstar reaches agreement to purchase Tribune

Post by MWmetalhead » Sun Dec 02, 2018 6:22 pm

As with the since-cancelled Sinclair purchase, this tentative deal will need to be approved by federal regulators.

If it moves forward, Nexstar will need to sell either WOOD-TV or WXMI in the West Michigan market. (I am 100% convinced it is WXMI that would be divested.)

https://www.woodtv.com/news/national/re ... 1634468670

Whomever wrote this article for News 8 forgot about the fact Nexstar also owns perennial ratings bottom feeders WOTV Battle Creek and WXSP! That's pretty bad, since both stations are run out of the same building as WOOD-TV. :rollin

Because WOTV is not a top four rated station, and because WXSP & its networked stations are not full-power TV stations, none of those properties will be required to be divested.

Another article on the matter:
https://deadline.com/2018/12/nexstar-me ... 202512528/

The reported purchase price is $4.1 billion. :eek
Recall, that the terminated deal between Tribune and Sinclair was going to be for $3.9 billion.

There is still pending litigation between Tribune and Sinclair. I presume that case will need to be settled in order for any sale to Nexstar to move forward. Although it was Tribune who filed suit against Sinclair for $1 billion, Sinclair filed a countersuit against Tribune. It would not shock me if Sinclair files a separate lawsuit in an effort to block the sale of Tribune to Nexstar.


Thanks, corporate radio, for finally tossing Nickelback to the curb. Now can you please do the same for Shinedown? THEY SUCK!!!

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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by moldyoldie » Mon Dec 03, 2018 5:35 am

I've read the reported price of $4.1 billion for Tribune is an all-cash deal and that Nexstar has lined up bank financing. The amount is more than Nexstar's current market cap of $3.7 billion! Nexstar also currently has about $4.1 billion of long-term debt on its books which represents more than two-thirds of its total capitalization, though much of it was recently refinanced according to their recent shareholder report. Tribune currently has $2.92 billion in long-term debt on its books. This deal, if it went through, would financially leverage Nexstar to the hilt! However, the scale realized would presumably bring about negotiating leverage for retransmission fees from cable/satellite operators, an increasingly relevant portion of revenues for TV broadcasters. I'm curious to see today's stock market reaction to the deal.

Roughly how much cash would accrue to Nexstar through any required asset sales?

(edit)
From Marketwatch: "Nexstar Media confirms deal to buy Tribune Media in a deal valued at $6.4 bln, including debt."
This price is more in line with what I figured considering Tribune's enterprise value of $5.42 billion as of Friday; i.e., Nexstar paying a reasonable premium.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by moldyoldie » Tue Dec 04, 2018 5:13 am

Standard & Poors is well aware of the increased debt burden of Nexstar post-acquisition, but is apparently optimistic enough in its future prospects to keep its debt rating unchanged at BB- (Non-investment grade speculative) despite being on the cusp of a downgrade in the near-term.
Investors obviously approve of the acquisition as Nexstar's common stock rose nearly 7% yesterday.
S&P Global Ratings wrote:NEW YORK (S&P Global Ratings) Dec. 3, 2018--S&P Global Ratings today said that
Nexstar Media Group Inc.'s (BB-/Stable/--) adjusted debt to
average-eight-quarters EBITDA could temporarily increase to the 5.5x downgrade
threshold in 2019 as a result of its proposed acquisition of Tribune Media Co.
(BB-/Stable/--) for $4.1 billion in cash (equivalent to $46.50 per share) plus
the assumption of Tribune's debt (more than $2 billion outstanding). However,
our ratings are not affected.

We expect the transaction will be funded with cash on hand and incremental
debt, causing leverage to increase from our current forecast of around 4x at
year-end 2018. Still, we believe there is a credible path for meaningful
leverage improvement within one year of closing to the 4.5x-5.5x bounds for
the rating, supported by identified synergies, asset sale proceeds, and
healthy cash flow generation. The company identified $160 million of synergies
to be realized within one year of closing, $75 million of which will be
realized near closing due to a stepup in Tribune's net retransmission rates to
Nexstar rates. Additionally, we expect solid revenue growth in 2020 stemming
from contract renewals with multichannel video programming distributors
(MVPDs) and political advertising associated with the U.S. presidential
election.

Nexstar reaches 39% of U.S. television households (25% after the UHF
discount), while Tribune reaches 42% of households (26% after the UHF
discount). Given the Federal Communications Commission's (FCC) 39% cap on
broadcaster reach (with the UHF discount), we expect Nexstar will be required
to divest stations or markets to maintain compliance with ownership
requirements and antitrust regulations. Pro forma for divestitures, Nexstar
expects to reach 39% of households (reflecting the UHF discount). We believe
this matter will receive significant attention from the companies after
Sinclair Broadcast Group's planned acquisition of Tribune fell through in
August after it was referred to an administrative law judge for review by the
FCC.

The addition of Tribune's 42 stations and WGN America cable network to
Nexstar's portfolio of 170 stations will make Nexstar the largest television
broadcaster in the U.S. (before any required divestitures), surpassing
Sinclair's 191 stations. We believe scale among U.S. TV broadcasters adds
efficiencies, including those in programming, overhead, and capital
expenditures. In addition, we believe it provides companies with a stronger
position in selling national advertising and negotiating retransmission
compensation agreements with cable and satellite companies and affiliation
agreements with TV networks. We expect industry consolidation will continue as
TV broadcasters aspire for greater scale to better compete amid viewership
shifts toward other media platforms such as direct to-consumer (DTC) and
subscription video on demand (SVoD).

The transaction is expected to close late in the third quarter of 2019. If the
deal does not close by Aug. 31, 2019, Tribune shareholders will be entitled to
additional cash consideration of about $0.30 per month per share (pro rated
for partial months and less an adjustment for dividends declared on or after
Sept. 1, 2019).

While our issuer credit ratings on both companies are unaffected, we could
consider lowering them if we expect leverage to remain above 5.5x on a
sustained basis due to elevated costs or delayed synergies because of
execution missteps or further debt-funded acquisitions.
FWIW, there may be a few legal procedures pending on behalf of Tribune shareholders regarding the fairness of the sale price. Stay tuned.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by MasterB » Tue Dec 04, 2018 11:26 pm

The buyers for WXMI Fox17 Scripps, Gray, Meredith, Standard Media A.K.A. Media General from the ashes who was going to buy Fox17 before Tribune ended the merger with Sinclair & Northwest. Which would make WXMI Fox17 there flagship TV station as I didn't know they had their HQ in Michigan I know they own TV stations in AZ, WA, NY and I think a couple other states as well.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by NewzKiller » Thu Dec 06, 2018 12:58 am

Scripps buying WXMI would make sense since Ed Fernandez rose through the ranks at Fox 17 and is now Regional VP for Scripps stations.



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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by ftballfan » Thu Dec 06, 2018 2:18 pm

Grand Rapids is way too large of a market for Northwest Broadcasting (most of their markets are smaller than Traverse City-Cadillac and some are smaller than Marquette)



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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by MWmetalhead » Thu Dec 06, 2018 7:37 pm

...supported by identified synergies, asset sale proceeds, and
healthy cash flow generation. The company identified $160 million of synergies
to be realized within one year of closing, $75 million of which will be
realized near closing due to a stepup in Tribune's net retransmission rates to
Nexstar rates. Additionally, we expect solid revenue growth in 2020 stemming
from contract renewals with multichannel video programming distributors
(MVPDs) and political advertising associated with the U.S. presidential
election.
Do all of Tribune's cable & sat retransmission agreements expire in the 2019-2020 timeframe? Aren't these generally multi-year deals?

The revenue growth in 2020 from political advertising will be fleeting.

Broadcast TV's strategy seems to be - "let consolidate so we can make it easier to gouge cable & satellite providers for retrans fees." The problem with that strategy, of course, is increased cord cutting!

I'm too lazy to look up the maturities of Tribunes and Nexstar's existing debt, but 5.5x leverage in 2019 and ~5.0x leverage in 2020 strike me as overly risky for a company whose eggs will almost entirely be in the broadcast TV basket (except for the rotten egg known as WGN America and the rotting egg known as WGN Radio).

I don't like the deal as contemplated, and once revenue growth targets fail to materialize as projected, I would expect significant budget cuts to be made.

A lot of question marks exist; would not surprise me if the deal never gets done.


Thanks, corporate radio, for finally tossing Nickelback to the curb. Now can you please do the same for Shinedown? THEY SUCK!!!

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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by moldyoldie » Fri Dec 07, 2018 10:03 am

MWmetalhead wrote:
Thu Dec 06, 2018 7:37 pm
I'm too lazy to look up the maturities of Tribunes and Nexstar's existing debt....
According to Value Line, as of 6/30/18 Nexstar had a total debt of $4.2876 billion with $4.2459 billion of long-term debt and $1.2 billion due in five years. These figures might have changed materially in the third quarter and in the current quarter. Political revenue in those quarters reportedly exceeded expectations and the company did report refinancing certain debt obligations. Yes, this is a very highly leveraged company!
I don't know much about Tribune except they had $2.9243 billion of long-term debt on the books at the end of Q3.
MWmetalhead wrote:A lot of question marks exist; would not surprise me if the deal never gets done.
Of course there are operational uncertainties, but why would the deal not go through considering any necessary asset sales? Are you saying it's not financially viable?
Last edited by moldyoldie on Fri Dec 07, 2018 3:49 pm, edited 1 time in total.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by Calvert DeForest » Fri Dec 07, 2018 11:37 am

I wonder what will happen to WGN-AM. Does Nexstar have any radio properties?


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by moldyoldie » Fri Dec 07, 2018 11:44 am

Calvert DeForest wrote:
Fri Dec 07, 2018 11:37 am
I wonder what will happen to WGN-AM. Does Nexstar have any radio properties?
Moldyoldie wrote:Roughly how much cash would accrue to Nexstar through any required asset sales?
I don't know about WGN-AM or if Nexstar has any other radio properties (I don't believe it does), but I just read an opinion piece that the stations Nexstar would divest to allow for the Tribune acquisition could fetch as high as $1 billion.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by MWmetalhead » Fri Dec 07, 2018 7:26 pm

Nexstar does not presently own any radio properties.
Of course there are operational uncertainties, but why would the deal not go through considering any necessary asset sales? Are you saying it's not financially viable?
What I'm saying is there are hurdles that need to be cleared for this deal to be able to move forward. First, shareholders of both companies will need to approve it. I suspect Tribune's shareholders will be fine with it, but will Nexstar's shareholders be comfortable with the added leverage?

Second, there is unresolved litigation between Sinclair and Tribune. Will Nexstar be willing to assume successor liability in the event the suit doesn't get settled or dismissed in a timely fashion? Will Sinclair perhaps even move to file an injunction motion in an effort to block this sale?

Third, there is regulatory approval risk. Will the station divestiture plan appease the FCC? Will Nexstar be able to line up buyers at acceptable (or at least tolerable) prices for all stations it will need to divest?

Finally, there's the little issue of the economy. Some economists think we may enter recession prior to the end of next year, although the more popular opinion is that it's likely to roll around some time in 2020. If signs of a looming recession emerge sooner than expected, Nexstar's shareholders are not going to have much of an appetite to lever the company at 5.5x cash flow. For an entity reliant on advertising from consumer-oriented businesses, 5.5x leverage can quickly become 7x or even 8x leverage during a recession! At leverage multiples of that magnitude, it becomes difficult to efficiently manage both the debt load and the business simultaneously for any extended length of time.


Thanks, corporate radio, for finally tossing Nickelback to the curb. Now can you please do the same for Shinedown? THEY SUCK!!!

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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by inmyopinion » Fri Dec 07, 2018 8:57 pm

MWmetalhead wrote:
Fri Dec 07, 2018 7:26 pm
Nexstar does not presently own any radio properties.
Of course there are operational uncertainties, but why would the deal not go through considering any necessary asset sales? Are you saying it's not financially viable?
What I'm saying is there are hurdles that need to be cleared for this deal to be able to move forward. First, shareholders of both companies will need to approve it. I suspect Tribune's shareholders will be fine with it, but will Nexstar's shareholders be comfortable with the added leverage?

Second, there is unresolved litigation between Sinclair and Tribune. Will Nexstar be willing to assume successor liability in the event the suit doesn't get settled or dismissed in a timely fashion? Will Sinclair perhaps even move to file an injunction motion in an effort to block this sale?

Third, there is regulatory approval risk. Will the station divestiture plan appease the FCC? Will Nexstar be able to line up buyers at acceptable (or at least tolerable) prices for all stations it will need to divest?

Finally, there's the little issue of the economy. Some economists think we may enter recession prior to the end of next year, although the more popular opinion is that it's likely to roll around some time in 2020. If signs of a looming recession emerge sooner than expected, Nexstar's shareholders are not going to have much of an appetite to lever the company at 5.5x cash flow. For an entity reliant on advertising from consumer-oriented businesses, 5.5x leverage can quickly become 7x or even 8x leverage during a recession! At leverage multiples of that magnitude, it becomes difficult to efficiently manage both the debt load and the business simultaneously for any extended length of time.
I would argue this deal is much easier due to the trial balloon that was floated and failed with the recent Sinclair attempt. First off, Nexstar knows it can't fool around trying to hold on to too much, and it should be pretty clear by now what NEEDS to be done to get FCC/DOJ approval. And lets be honest, there's only one company that's known to be TOO greedy, that tries to have it cake and eat it too. Also, considering Sinclair had buyers lined up (some fake and others real), I don't see why those same companies wouldn't still want to get into the game, i.e. Standard Media, Fox O & O, it's only been a few months since they were ready to fork over the $$ to take the stations off Sinclair's hands. Sure, not all the overlap market/stations are the same as the last attempt, but I think you get my point, and there are only about 12 that need to be divested with this deal, a lot fewer than the Sinclair (potential) merger.

Also, Nexstar's and Tribune's shareholders are on board, they'd have to be or the deal wouldn't have been announced. As for your other concerns, could it turn out to be a poor investment by Nexstar due to the issues you mention above, recession/election year etc? Sure, all multi-billion dollar purchases are incredibly risky.

"In my opinion", the only thing that may be tougher this go round is that a Democratic House of Reps will have a say in this "big business is evil" merger, unlike the deal with Sinclair when it was entirely red, but at the end of the day, Ajit Pai is still the head of the FCC and he's not blue.



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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by MWmetalhead » Sat Dec 08, 2018 8:08 am

I tend to agree that Nexstar will be smarter than Sinclair was with regard to the divestiture game.
Also, Nexstar's and Tribune's shareholders are on board, they'd have to be or the deal wouldn't have been announced.
Wrong. These are publicly traded companies. The deal must be announced first. That is required by law. There are proxy solicitation procedures that must be followed according to SEC regulations. The very first part of that process involves the filing of an 8K (which usually is a regurgitation of a press release, more or less) to announce the proposed transaction.

Only the board of directors of each company have approved the deal at this point. Their approval gets the ball rolling on the other items that now must be accomplished.


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by moldyoldie » Sat Dec 08, 2018 8:26 am

To Mr. Metalhead's point about shareholder approval, I've already read about three separate law firms investigating "whether the Board of Tribune breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Nexstar is underpaying for Tribune shares, thus unlawfully harming Tribune shareholders."

Fun, fun, fun! :hat


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Re: Breaking: Nexstar reaches agreement to purchase Tribune

Post by inmyopinion » Sat Dec 08, 2018 8:23 pm

moldyoldie wrote:
Sat Dec 08, 2018 8:26 am
To Mr. Metalhead's point about shareholder approval, I've already read about three separate law firms investigating "whether the Board of Tribune breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Nexstar is underpaying for Tribune shares, thus unlawfully harming Tribune shareholders."

Fun, fun, fun! :hat
And I have read EVERYWHERE that Nexstar outbid "Apollo Global" for Tribune. Not sure how that equates to them not adequately shopping their company. No biggie to me, I just think you all are overreacting to the one outlier, The Sinclair deal dying. You're all failing to remember that Nexstar, Tribune, Apollo (whoever they are), Tegna, Scripps...are NOT Sinclair. Don't let one bad apple (slimy company) spoil the whole bunch.



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