Retrans Will Rise in Wake of Nexstar-Tribune Deal

Nexstar Media Group estimates it will reap at least $75 million in additional retransmission consent fees after its $6.4 billion purchase of Tribune Media closes next year, meaning cable, satellite and telco TV operators will have to dig deeper into the well.

Nexstar agreed to purchase Tribune Media for $46.50 per share in cash in a deal valued at $6.4 billion including assumed debt. Nexstar said it hopes to obtain the necessary regulatory approvals and close the deal sometime in the third quarter of 2019.

Tribune’s 42 local TV stations in 39 markets will vault Nexstar into the No 1 spot among broadcast station groups with 216 stations in 118 markets. The combined Nexstar-Tribune would still fall below the federal TV station ownership cap of 39% of the total TV market, although the company does expect to divest some stations.

On a conference call with analysts to discuss the deal, Nexstar said it expects retrans revenue to rise by about $75 million in the combined company just by applying Nexstar’s rates to the Tribune stations. That figure doesn’t include increased renewal revenue as deals expire.

On the call Nexstar chairman and CEO Perry Sook said that Nexstar’s enthusiasm for retrans growth hasn’t waned with this deal. “At this point, we would slightly bet the over.”

The deal would come about one year after Nexstar purchased Media General, increasing its ownership to 174 TV stations across the country. On the call, Nexstar chief financial officer Thomas Carter said that about 10% of its former Media General stations were up for retrans renewals this year, with 5% of those deals already completed and the remainder due this month. About 70% of Nexstar’s retrans deals come up in 2019, with 15% of those up in the middle of the year and the remainder in the back half.

Sook said that in the past, acquired stations moved to the Nexstar rate card within 30 days of those deals closing. He anticipated the same time frame for the Tribune stations.

“It will be fairly quickly following the acquisition,” Sook said.

What will happen to Tribune Media’s cable channel WGN America is still up in the air. Sook said that he was impressed with the turnaround at the channel: cash flow has gone from a negative showing in 2017 to a “nine-digit” positive this year. But he said some outside parties have expressed interest in buying the channel, and if the right deal came along, Nexstar would sell the network.

“I would say we’re happy with the progress they have made,” Sook said on the call. “If someone is willing to pay a significant premium, we’re also happy to have that discussion as well. Currently we have no plans to immediately divest of it.”

Nexstar had looked at the Tribune assets in 2017, but backed off when the price became too rich for its tastes. Sinclair Broadcast Group had initially agreed to buy Tribune in May 2017 for $3.9 billion, but Tribune terminated that deal in August after what it said was Sinclair’s sluggishness through the regulatory approval process. 

TV station consolidation is expected to continue in earnest over the net few years, in the wake of 21st Century Fox’s asset sale to Disney, as “New Fox” has said it would eye purchasing more stations, and Cox Enterprises said in July it was considering placing about 14 properties on the block.

Sook said Nexstar would focus on completing its current deal and integrating the Tribune stations, but added that if the federal ownership cap either rises or is eliminated, it would consider bulking up even more.

“We want to de-lever a bit and digest this before we would taking another step, but if the rules were to change and there was an opportunity as accretive as this, we’d obviously be very interested,” Sook said, adding that the deal also opens up the opportunity of swapping stations with other broadcasters to beef up its presence in some markets. “There are a lot of levers to pull post-completion, but completing the acquisition is going to be Job 1 for us in the immediate future."