Nexstar buying Tribune Media for $6.4B

Nexstar’s $46.50 per share offer, which includes Tribune’s outstanding debut, marks a 45% premium over Tribune’s stock price from July 18. (Pixabay/rawpixel)

After Sinclair’s high-profile $3.9 billion Tribune Media acquisition fell through amid regulatory pressure, Nexstar is jumping in with a $6.4 billion bid for the television broadcaster.

Both companies’ boards have already approved the deal and the transaction is expected to close in the third quarter of 2019. Nexstar said its national television broadcast coverage will reach approximately 39% of U.S. television households after accounting for anticipated station divestitures and reflecting the FCC’s UHF discount.

Nexstar is buying Tribune Media assets including 42 owned or operated broadcast television stations across the U.S., cable network WGN America, a 31% ownership stake in TV Food Network and equity investments in several digital media businesses.

Nexstar CEO Perry Sook said the deal will result in approximately 46% growth in Nexstar’s average annual free cash flow in the 2018 to 2019 cycle to approximately $900 million, or approximately $19.50 per share.

“In the twenty two years since we founded Nexstar, we have demonstrated prudent use of leverage and an ability to source capital at attractive rates to support our strategies for growth and the enhancement of shareholder value,” said Sook in a statement.

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Tribune CEO Peter Kern offered a similarly sunny outlook on the Nexstar-Tribune combination.

“The premium value our shareholders are receiving reflects the hard work of our dedicated Tribune employees in maximizing the value of our portfolio. I look forward to working closely with the Nexstar team to deliver on the value of this compelling combination and to ensure a smooth transition and integration of our companies,” said Kern in a statement.

Nexstar’s $46.50 per share offer, which includes Tribune’s outstanding debut, marks a 45% premium over Tribune’s stock price from July 18 when the FCC essentially nixed the Sinclair deal by announcing a hearing designation order to the plans.

Of course, Nexstar will have to clear the same regulatory hurdles that tripped up Sinclair’s deal if it wants to own Tribune. In Sinclair’s case, issues arose from certain station divestiture plans. In many cases, Sinclair appeared to be entering into “sidecar” deals that would allow the company to sell stations but still maintain control of the station and reserve a buyback option for a later date.

Sinclair had planned to sell stations in Dallas and Houston to Cunningham Broadcasting, which is owned by the estate of Sinclair Executive Chairman David Smith’s mother, Carolyn Smith. Sinclair also tried to sell WGN-TV in Chicago to a newly formed company headed by Steven Fader, CEO of Atlantic Automotive, a Maryland auto dealership group in which Smith holds a controlling interest.

It’s unclear at this time which Tribune stations or assets Nexstar may be compelled to sell off before closing the deal.