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Nexstar Media Group agreed to acquire Tribune Media Co. for $4.1 billion in a deal set to create the largest operator of local television stations in the U.S.
Including the assumption of debt, the takeover price amounts to $6.4 billion. Nexstar, based in Irving, Texas, currently operates more than 100 TV stations in 58 markets, covering about 18 percent of U.S. TV households.
In August, Sinclair Broadcast Group’s planned $3.9 billion takeover of Tribune was canceled and a lawsuit was filed by Tribune seeking “compensation for all losses incurred as a result of Sinclair’s material breaches of the merger agreement.” Sinclair currently operates the most TV stations in the U.S.
Nexstar and Tribune made the deal official early Monday.
During an analyst call Monday morning Nexstar chairman, president and CEO Perry Sook argued the deal for Tribune Media creates a “leading pure-play broadcast operator” offering local news, entertainment, sports, lifestyle and network programming and content via broadcast and digital media platforms. Nexstar eyed a possible deal for Tribune Media in 2017, but was ultimately out-bid by Sinclair Broadcasting for the TV station group.
Sook said the Tribune stations had since then performed better as a portfolio than Nexstar had anticipated when first kicking the tires last year. “The company is just in a better place now and the management team has done a great job,” Sook said.
Sook added he spoke Monday morning to Federal Communications Commission chairman Ajit Pai as he began discussions to secure regulatory approval for the deal. Nexstar has a divestiture plan drawn up to secure regulatory approval from the FCC as it has 13 overlapping markets with existing Tribune Media markets in which it has offered to sell TV stations.
“There’s a number of ways to solve the equation here,” Sook told analysts. He anticipates around $1 billion in asset sales, depending on which mix of TV stations Nexstar and the FCC agree on. The deal for Tribune Media is expected to close in the third quarter of 2019.
Nexstar anticipates around $160 million in synergies from the deal in its first year. That includes $20 million in corporate overhead savings, another $65 million in station and digital group operating cost reductions, and $75 million in net retransmission revenue.
Sook said Nexstar has no immediate plans to sell off Tribune’s WGN-TV in Chicago, but would consider a deal if “someone is willing to pay a significant premium.” Thomas Carter, Nexstar executive vp and CFO, echoed that view over the 31 percent stake in the Food Network cable channel to be acquired, which has recurring cash flow from its distribution revenues, heralding no early sale.
“We don’t see that there is a headlong rush to monetize that asset, and certainly not at any price,” Carter said. Sook also pointed to the benefits of recurring cash flow from the 31 percent stake in the Food Network cable TV channel to be acquired, and growing political advertising revenue anticipated from the 2020 U.S. presidential campaign and election, to justify the Tribune Media deal.
“We are delighted to have reached this agreement with Nexstar as it provides Tribune shareholders with substantial value and a well-defined path to closing,” Tribune Media CEO Peter Kern added in a statement. “Together with Nexstar we can better compete by delivering a nationally integrated, comprehensive and competitive offering across all our markets. We believe this combination will produce an even stronger broadcast and digital platform that builds on the accomplishments of both companies and benefits our viewers and advertisers.”
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