Media General has completed the negotiation of terms for a transaction under which Nexstar Broadcasting Group will acquire Media General.
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Key terms of the negotiated transaction include that Media General shareholders would receive, for each Media General share: $10.55 per share in cash; 0.1249 of a share of Nexstar Class A common stock for each Media General share; and a contingent value right (CVR) for each Media General share entitling Media General shareholders to net cash proceeds as received from the sale of Media General's spectrum in the FCC's upcoming spectrum auction, adjusted.
As of closing prices on January 6, 2016, the negotiated transaction reflects a value of $17.66 per share plus the value of the CVR. Upon close of the transaction, former Media General shareholders would hold approximately 33.4% of Nexstar’s outstanding shares‎.
Under the terms of Media General’s negotiated transaction with Nexstar, the proceeds that CVR holders would receive would be adjusted to account for the benefit that would accrue to former Media General shareholders, as post-transaction shareholders of Nexstar, from any net cash proceeds that Nexstar will receive from the sale of its spectrum in the auction.
Media General estimates that its spectrum assets could potentially be worth up to $4.29 in after-tax value per share, before the netting mechanism associated with the CVR in the negotiated Nexstar transaction.
Excluding Media General's estimated value of its spectrum assets, the negotiated transaction with Nexstar values Media General at approximately 10.7x the company's 2014/2015 average-annual adjusted EBITDA (based on Wall Street equity research estimates).
Including the estimated after-tax value of Media General’s spectrum assets, the negotiated transaction values Media General at up to 12.0x the company's 2014/2015 average-annual adjusted EBITDA (based on Wall Street equity research estimates).
In addition, under the terms of the negotiated transaction, Nexstar would agree to divest the TV stations necessary to obtain FCC regulatory approval. A transaction would not be subject to any financing condition. Two Media General directors would join the Nexstar Board of Directors at closing. ■