I don't think your factoring in the cash payment to the Lin Shareholders, that's a big chunk of market cap going away. I think ~$600m or so. Don't remember.
Shareholders get to choose between cash and stock. The cash portion is $25.97 and with Lin stock at $22.76 you can bet that everyone will choose cash. Which means roughly 50% will be taken out in cash the remaining go in about 1.4 shares of Media General stock. It's done on a pro rata basis, all shareholders treated the same, but they will only payout a certain amount in cash, that % is roughly 50% if everyone chooses that option. I think pro forma MEG will have about 138m shares of stock outstanding. It's trading at roughly a 20% FCF yield. Management has made no secrete that they will be quick to buy more TV stations as soon as this transaction closes. Nexstar and Gray are the most likely candidates. Not sure why MEG trades cheapest in the sector, especially since they have the best tax shield.
This crushes the bear case that networks will go it alone and convert to cable, strengthens the relationship between the networks and the affiliates.
He converted his options to common. From the last filing he hasn't sold. Yeah, that deal should close soon, I'm looking forward to cashing a lot out and looking to re-allocate with a lot of names beaten up.
From the very beginning all shareholders were going to be treated the same, what happened was is one of these "ambulance chaser" law firms claimed otherwise and filed a lawsuit. The company told them that they should re-read the merger agreement, and when the law firm did they withdrew their complaint. I think it was 24 hours, but the headline was made and has continued to cause confusion.
Buffet's bank debt got taken out, he's no longer a holder of the debt, but has retained his equity holdings. Lin shareholders will get $25.97 (going off memory), but if everyone chooses the cash option then that will only be about 50% of the holders, and the rest will be rolled into new stock. Nobody is getting special treatment, all shareholders are being treated the same. I plan to roll my LIN proceeds into EVC as I don't own it yet and it's the best spectrum play out there.
The report was done by Greenhill I believe, I haven't seen the exact book, but I've seen analysis by people who have. It's a lot different then I think people thought, Dells OTA seems to have hit a home run, they seemed to have had the inside track. The surprising part is that a lot of smaller markets are getting big $$ and some big markets are offered very little. I did just some quick math, in EVC's markets well north of a Billion dollars. The small markets in California are offered big #s, same with the Northeast and Ohio/Michigan, also parts of Florida. Places like Texas not so much. Pennsylvania and Maryland were also big.
The $120m i believe is the maximum the FCC will pay, so they probably get something less but probably not much less because their aren't many stations that are fully powered at UHF, think they have the only one. The numbers are staggering, it's not just the big markets either. And by the way, their are some very smart people who have taken advantage of this, Michael Dell for example. He bought a bunch of stations on the cheap for this reason, so it's not like we are on an island with our thought process. I know a lot of broadcasters said they won't participate, but I think they might have to reconsider given the size of these numbers. FCC says they could cut a check to the broadcasters for $38B!
If you guys haven't seen what the FCC is willing to pay broadcasters I'd recommend you check it out. It's nothing short of staggering/game changing. I'll give you an example. The FCC is willing to pay up to $120m for the spectrum of a fully powered digital station in Santa Barabara, There are only 4 of these in the market, EVC has one. That station does about $2m in revenue and the FCC is willing to buy it for up to $120m. And by the way, (I could be wrong about this), but they appear to be in the sweet spot with channel 38, believe that is UHF, the spectrum the FCC covets. Appreciate others comments on this.
EVC has $40m in cash, and $362M in debt. They will generate roughly $55M-$75M in free cash flow per year. In the depths of the recession they did generate close to $0 in 2011, but they have paid down and refianced their debt so if they ever had that bad of a time again they'd be making money. Now because the company has refinanced all their debt they are in the position of "what do I do with that $55m-$75m per year". They have paid some special dividends, and now they are paying a recurring dividend. They've also announced a buy back, and they've also made some digital acquisitions. They haven't paid back much debt because they've wisely figured out that it doesn't make much economic sense to do so. It looks like this year that roughly 1/3 of the cash flow will go to shareholders, 1/3 to debt pay down, and 1/3 towards acquisitions. In my opinion, not bad. Next year won't be as good given the lack of election and no world cup, but their results are pretty much going to follow the economy. The stock bounces around crazily, but the business fundamentals do not. 2016 will be a better year. I'm being overly simplistic, but the balance sheet is in good shape with no near term maturities. So if they are generating ~$60m+ in cash per year then it would only take a little over 5 years to buy every share at today's price. That's what I call.......excellent value. Full disclosure, I don't own the stock, but I think it's very cheap.
This board has been a little ridiculous (although entertaining at times). The numbers are what they are. If someone wants to argue that they think they are going lower, that's fine, if someone wants to argue that they are going higher that's fine too. But to say the business is going away or falling off a cliff just is not reality. EVC in theory could buy back 15m+ shares a year, pay $0.65 annual divi, or reduce net debt by 20% per year without sacrificing anything.
They wouldn't do that because a larger portion on their viewers watch it over the air, plus if you live near the border you get programming from Mexico and the US which many like better than just the US. Plus, it's free!
By law Univision is not allowed to cut EVC out (unless they find a replacement broadcaster), as it is they are already over the ownership cap. Univision/Entravision relationship is very good where they both benefit. Their is nothing in the Stela bill that's worrisome, nothing. Just sit back and let the company generate cash and pay down debt/increase dividends. And yes, the broadcasters do get 40% of the ratings. I believe it's something like 99 out of the top 100 shows are broadcast TV. It's crazy.
Actually the broadcasters want A La Carte, but this bill would have been A La Carte for just them. They are governed by much more rules than the cable networks, they just want an equal playing field.
Spectrum is an extremely valuable asset, but I don't think any of these broadcasters will participate in the auction. Especially with the FCC's recent behavior. They prefer to get in the broadband business themselves, something everyone (except the Cable/Telephone companies) would want them to do.
I don't think the political environment is bad at all for the broadcasters. They still have the argument that they generate 40% of the ratings and only get 7% of the fees. The days of getting content for free are over, the cable companies know this. They are just trying to limit the damage since this is the first situation they've been in where they don't have all the leverage. They are accustom to bullying the content companies and consumers.
I think Aereo is dead and a non-issue at this point, remember the copyright office said it was not a cable company and their investor has already said "we didn't lose much money on it", so I think they are done and a non-issue at this point. I think the fear these days are two fold. 1) That advertising is going all digital and 2) The networks are going to get 90% of the retrans dollars. Both fears are ridiculous, but the market seemed really worried about Lin losing it's affiliate agreement with CBS to Tribune. I view this as a one off event, but I don't think the markets do. When people see the retrans dollars next year they will be pleasantly surprised. Most investors don't understand the eco-system as it pertains to the affiliates. I'll also add that nothing is going to happen out of the Senate, even Rockefeller said it has no chance of passing, he's just trying to pay back to all of those that filled his coffers (the cable co's) before he retires. The broadcasters are fine with A La Carte, they just want to play by the same rules as everyone (the cable channels) and the idea that just broadcasters go a la carte is stupid. Nothing is going to change the current eco-system until full re-write of the Telecom Act. I think it's 2-3 years away still giving the timing of the elections. The broadcasters will be pushing for a lot of ownership law changes. The reality is that everything here is going to continue to hum along nicely over the next couple of years. More consolidation, good earnings and cash flow.
I completely agree, and I'm also adding. I like the fact that the value of the spectrum is almost the value of the stock, you are essentially getting the business for free. I think Inmarsat said it best with their press release, "we'd like to be the Gogo of Europe". Clearly the shorts and others are lining up against this stock, but if they keep doing what they are doing the fundamentals will run over them.