The headline value what they offer is not relevant. What is relevant is the cash component and the % of the combine company that MEG shareholders will own. The current offer could be better than the $17 offer. The reason being is that both (pretty much all) stocks are lower. I don't think NXST has much room on the cash portion of the offer, this is because they don't want to lever up the balance sheet too high. I think they could offer MEG shareholders roughly 40% of the new company (as opposed to 26% in their original offer) and still have it be substantially accretive to NXST shareholders. The NXST/MEG combo has more synergies and attractive characteristics than the MEG/MDP deal. At 40%, I believe the new NXST would generate about $9 per share in FCF. Throw whatever multiple you want on that number to get your target, but that's better than NXST current $7.65 guidance. So as a MEG shareholder, I look at as I cash out, and I get a decent amount of shares in the new company that I believe will double from current levels. FYI, the 40% number would be roughly $18 with the current stock prices.
As a MEG shareholder I have to admit, this is fun. Maybe MDP comes back and decides to buy MEG or a 3rd party joins the fight. Starboard and other shareholders won't allow MEG to play games, I think everyone wants a good deal to get done, but if MEG doesn't something shady they will lay down the hammer by kicking out the board. Fun stuff.
But now shareholders get to vote and decide. They will also kick the board out if they have too. The new share structure changes everything. This will be fun to watch.
But it's not up to him anymore. He use to have a special share of stock, that is no longer the case. It's a whole new ball game.
mediatrader is absolutely correct, however Kim doesn't have a blocking position, majority of shareholders will want the NXST deal. BOD have a fiduciary duty, negotiating a deal with NXST is better than the deal they have done with MDP. NXST is smart to take advantage of this ugly market.
Secured debt, my guess is they will need about $350m-$400m depending on the timing of the close, they have plenty of secured capacity, probably pay ~5% for debt.
I believe the new company is worth at least $30. Keep in mind that both MEG and MDP have almost all of their retrains contracts coming up over the next 2 years. As a TV investor, I don't like the magazine assets, although they do have a lot of digital properties/expertise. I would expect the company to spin off the magazine assets and merge with Time, just makes too much sense. The balance sheet is fine, leverage will come down quickly with higher Ebitda and debt pay down. This business supports 5x leverage, no problem, remember MEG was over 8x at one point. I'm very happy to hear they are committed to paying a dividend and doing a buyback. They also have some stations to sell/swap, some of the are in great spectrum markets like Hartford and Springfield, I believe they have the top stations in those markets regarding "interference value" and that is exactly what you want. Any transaction that increases free cash flow per share is good in my book, and this deal does that. The market says I'm in the minority on liking this deal, but that's fine with me, as always, time will tell.
Curious what people think (I posted the same question on the FTR board), FTR needs about $9b to pay for the VZ acquisition, HY market is a little pricy these days, isn't CSAL the perfect finance vehicle for them? I would think CSAL wants to diversify away from the wireline business, maybe they aren't ready for such a big deal (thoughts around how they would finance it).
Buy the properties from VZ for 5x, and go ahead and do a sale/lease back with CSAL at ~9x. Anyone think they will go that option or just finance the rest of the deal in the HY market?
I should add, and Dan I'm sure you know this, GTN Management gave us net retrains guidance for the next 3 years. They have all their reverse retrains deals locked up over the long term, they even gave us their assumptions on the retrains side for the subs they have coming up (using today's rates), which as we all are know is a conservative assumption. Net retrans dollars are going higher over the next 3 years, it's locked in.
That is not what the Bernstein Media Analyst said. He essentially said the Cable Networks model is problematic and that multiples paid for affiliate fees should be lower (not retrains). He doesn't cover the affiliates, and the only broadcasters he does cover are the network owned CBS, and FOX, (DIS has a few stations). He considers them the safest names in the sector because of their sports rights and news, which are not disrupted by time shifted viewing. Oddly enough he likes Nielsen, which I think is on the firing lines more than anyone.
Nobody downgraded the affiliates, Wells reiterated their outperform on them. This is a throw the baby out with the bath water moment. It happens, that's what the stock market does from time to time. If you are a long term investor you just take advantage of opportunities like this.
No idea, that's up to the market, just looking forward to the fundamentals improving. And I think we will get a name change, "Media One" is probably a real possibility.
Yes I agree, it is confusing to investors and I've heard people say, "but they reported another loss" without understanding the economics, they just see the headlines. I'd focus on Ebitda, and from there use cash taxes, cash interest, capex to get to free cash flow, or you can look at the cash flow statement and look at cash from operations and subtract out capex. I love this story, it's a levered equity and they should delever rapidly, which means the stock should fly. Don't forget they also own a TV station in Indianapolis, so they will be selling that spectrum in the broadcast incentive auction next year as well.
For the same reason that they report a loss even though they are generating cash. They have several corporate entities, the reality is they don't pay cash taxes and never will (at least the foreseeable future) because they have huge NOLs. It's an accounting issue, not a cash flow issue. Management see's the company generating about $50m per year in free cash flow and growing rapidly. The TV business is automatic given their long term contracts. The Casino deal is automatic and kicks in 2H next year. Radio has been weak given a combination of a weak market and self inflected wounds. However, the positive factors have outweighed the weakness in radio.
The stock market is not rational in the near term, never is. It was another great Q, and the next 15 months are going to be fantastic for them. For long term investors, no worries.
The FCC is coming out with the Auction Rules on Thursday. That will be more important than earnings. Unfortunately management won't have adequate time to comment on the rules.
Info, I agree with your take. The court punted. The FCC and Congress will ultimately decide how to classify OTT players. It will just be another customer/retrains opportunity. Tegna talked about it on their call today.