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.