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Meredith Won’t Back Down

Shortly after Nexstar Broadcasting Group said it had reached an agreement with Media General to acquire the broadcaster in a cash and stock deal valued at $4.7 billion, Media General’s former suitor – Meredith Corp. – upped the ante by sweetening its offer for the company to more than $20 per share.

The potential bidding war sent Media General shares up about 4% (70 cents per share) to $16.37 each in early trading Thursday. Nexstar shares were down 5.4% ($3.07 each) to $53.83 and Meredith shares fell 1.7% (71 cents each) to $40.75 per share.

In a statement Thursday, Media General and Nexstar said they had agreed to a deal that will give Media General shareholders $10.55 per share in cash and 0.1249 shares of Nexstar stock for every Media General share they own. Media General shareholders also are expected to receive cash consideration from the upcoming Federal Communications Commission spectrum auction, boosting the total value of the deal to $17.66 per share. But that deal was contingent on Media General canceling its agreement to buy Meredith Corp. for $2.4 billion in cash and stock.

In a statement Nexstar chairman and CEO Perry Sook said the combination would be a “transformational event that enables both companies’ shareholders to participate in the near- and long-term upside of a pure-play broadcasting company with expanded audience reach, a more diversified portfolio and a significantly stronger financial profile, led by a proven broadcast and digital media management team.”

Nexstar also noted that it intends to divest the TV stations necessary to obtain FCC regulatory approval of the proposed transaction.

Not to be outdone, Meredith countered with an offer that includes $3.90 per share in cash (a total of $510 million); an even exchange of one share of Meredith stock for every Media General share (a pro-forma equity value of $14.94 per share) and a contingent value right for cash proceeds resulting from the upcoming Federal Communications Commission spectrum auctions that could be worth as much as $4.29 per share after taxes.

Media General shareholders would own 50.2% and Meredith shareholders, who would receive 2.8244 shares of Meredith Media General for each share of Meredith, would own 49.8% of the combined Meredith Media General.  Meredith shareholders would receive $14.95 per Meredith share in cash at closing for total cash proceeds of approximately $685 million.

"We're confident that the combination of Meredith and Media General will generate superior value over both the near- and long-term, particularly when compared to the unsolicited offer Nexstar Broadcasting Group has made for Media General," said Meredith Chairman and CEO Stephen Lacy in a statement.  "Given the compelling and superior value inherent in this proposal, we ask that the Media General Board of Directors re-enter serious negotiations around the Merger of Equals structure and its merits." 

Media General had agreed in September to buy Meredith in a deal valued at $2.4 billion. While that deal would have boosted the combined companies’ reach to 88 broadcast stations across the country, some critics of the deal said Meredith’s publishing assets – including Parents, Family Circle and Better Homes & Garden magazines – would be a drag on results.

Nexstar made its first counter offer just a few weeks later, proposing a $4.1 billion stock and cash offer for the company.

A Nexstar pairing with Media General wouldn’t be without problems either. The combined company would be a stronger No. 2 broadcast group with about 162 stations across the country – second only to Sinclair Broadcasting Group’s 164 stations, but would  most likely have to divest some stations to receive FCC approval of the deal. Nexstar has said it is willing to do that.