Nexstar Media Group Inc. agreed to buy Chicago's Tribune Media on Monday, four months after the collapse of a similar bid from Sinclair Broadcast Group. The deal creates the largest owner of local-TV stations in the U.S.
Nexstar is acquiring Tribune with an all-cash offer that values the Chicago-based company at $46.50 a share, the two said in a statement Monday. Including the assumption of debt, the price amounts to $6.4 billion.
Nexstar, based in Irving, Texas, has about 175 TV stations, including Little Rock's KARK and Fort Smith's KFTA, plus other NBC, CBS, ABC and Fox affiliates. Chicago-based Tribune owns or operates more than 40 stations, including Fort Smith's KFSM as well as the national network WGN America.
Four months ago, Sinclair was forced to abandon its own takeover attempt for Tribune after the $3.9 billion transaction drew the ire of regulators. Nexstar had been interested in Tribune last year before Sinclair had agreed to buy it. Sinclair is the parent company of Little Rock's KATV.
Nexstar outbid private equity firm Apollo Global Management LLC, a person familiar with the transaction told Bloomberg News over the weekend. Tribune has now fetched a higher price from Nexstar -- and a 16 percent premium over its closing price of $40.26 at the end of last week. The companies said the deal, which they expect to close in the third quarter of 2019, would add immediately to Nexstar's results, including $160 million of synergies in the first year.
Bulking up will give Nexstar more leverage as it negotiates retransmission fees from pay-TV providers. Broadcasting companies also are pairing up in hopes that their size will help ward off a threat from Netflix Inc. and other streaming services.
"One of the responses we've seen across the media landscape has been consolidation," said Paul Sweeney, an analyst at Bloomberg Intelligence. "Let's get bigger. Let's get scale. Let's respond to some of these technology media companies."
This marks the second major deal among broadcast-station owners in 2018. In June, Gray Television Inc. agreed to buy Raycom Media Inc., owner of Jonesboro's KAIT, for $3.65 billion.
On a call with analysts Monday, Nexstar said it would divest assets in 13 markets to win approval for the Tribune deal. Executives said the divestitures and the acquisition of Tribune would leave the combined company "just below" the federal cap of owning stations that reach 39 percent of U.S. households, but they would be open to more deals if the cap ever rises.
Sinclair's Tribune takeover began to crumble over the summer, when U.S. Federal Communications Commission Chairman Ajit Pai questioned the legality of a plan to sell TV stations in order to meet ownership limits. "I have serious concerns about the Sinclair/Tribune transaction," Pai said at the time, sending shares of both companies plunging.
Sinclair had agreed to shed almost two dozen of its own stations to score approval by the FCC. But Pai said Sinclair might still be able to operate the stations "in practice, even if not in name."
The commission voted unanimously to send the issue to an administrative hearing judge, something that can delay or even kill a transaction. Tribune ultimately backed out of the deal.
Sinclair, which has 191 stations in its lineup, is known as a politically conservative broadcaster that's friendly to President Donald Trump's administration. As the Tribune deal fell apart, the president slammed the FCC's role in scuttling the merger, saying it was "sad and unfair."
"This would have been a great and much needed Conservative voice for and of the People," Trump said on Twitter in July.
In acquiring Tribune, Nexstar may be able to sidestep the regulatory problems that Sinclair faced, according to Bloomberg Intelligence's Sweeney.
"Nexstar has a very longstanding, positive relationship with the FCC," he said.
Information for this article was contributed by Gerry Smith, Nabila Ahmed, Eric Newcomer and James Ludden of Bloomberg News and by staff of The Associated Press.
Business on 12/04/2018