Last week, Tribune Media Company (NYSE: TRCO) got the okay from stockholders to proceed with a merger with Nexstar Media Group (NASDAQ: NXST). The companies had entered an agreement in December for Nexstar to acquire Tribune Media for $46.50 per share, for an approximate value of $6.4 billion, including the assumption of Tribune Media’s outstanding debt. According to a Tribune Media news release, this represents a 15.5 percent premium on the stock’s value as of November 30, 2018.
“We’re extremely pleased with today’s vote,” said Peter Kern, Tribune Media’s CEO in a March 12 news release. “It confirms that our stockholders clearly recognize the significant value we expect to be delivered by this merger. We look forward to continuing our work with Nexstar to obtain the necessary regulatory approvals that will enable us to close this transaction later this year.”
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The deal is still subject to regulatory approvals which will require that Tribune and Nexstar both sell off some of their respective TV stations. On Wednesday, Nexstar announced it will sell 19 stations in 15 markets for $1.32 billion in cash to comply with the Federal Communications Commission rules about local and national TV ownership. Eleven stations in eight markets, including New York, Phoenix, Miami-Ft. Lauderdale, Salt Lake City, Grand Rapids-Kalamazoo-Battle Creek, MI, Richmond-Petersburg, VA, and Norfolk-Portsmouth-Newport News, VA, will go to Tegna Inc. (NASDAQ: TGNA) for $740 million.
The remaining eight stations in seven markets, including Hartford-New Haven, CT, Harrisburg-Lancaster-Lebanon-York, PA, Memphis, Wilkes Barre-Scranton, PA, Des Moines-Ames, IA, Huntsville-Decatur-Florence, AL, Davenport, IA-Rock Island-Moline, IL and Ft. Smith-Fayetteville-Springdale-Rogers, AR, will be sold to The E.W. Scripps Co. (NASDAQ: SSP) for $580 million. In addition, Nexstar is negotiating to sell two stations in Indianapolis, Indiana. According to a March 20 news release, Nexstar will use the net proceeds from the sales to help fund the Tribune Media acquisition and to reduce debt.
Tribune Media previously had a $3.9 billion acquisition deal with Sinclair Broadcasting last summer, but the deal fell apart when the FCC expressed serious concerns that Sinclair would be violating antitrust regulations by not appropriately divesting itself of TV stations.
“The evidence we’ve received suggests that certain station divestures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law,” said FCC chairman Ajit Pai.
Since then Tribune Media has sued Sinclair for negotiating in bad faith, saying that Sinclair was looking out for its own interests, and Sinclair has filed a countersuit.
“Sinclair’s entire course of conduct has been in blatant violation of the merger agreement and, but for Sinclair’s actions, the transaction could have closed long ago.”
Sinclair’s loss is apparently Nexstar’s gain. The Texas-based company will establish a strong presence in major markets including New York, Los Angeles and Chicago, plus WGN America and a 31 percent share of the Food Network.
All’s fair in love and war, right? The FCC and Tribune Media disagree. That’s why Sinclair got the boot and Nexstar is the big winner here. Tribune Media shareholders are happy, receiving a premium on their stock value as of November 30. (Note: Today’s stock price of TRCO was $46.11,) and Nexstar is growing its TV presence across the country.