This will be interesting, MDP has the balance sheet to pay higher cash component, but NXST has better management and is a pure play. Both have substantial room to go higher and the deal to be accretive to their respective shareholder bases, just a matter of how bad they want it. Could see mid 20's and still be a good deal for both NXST and MDP shareholders, the math works. Although I still say the structure of the deal is more significant than the actually number they value MEG at, given the stock component.
Appreciate the advice, but my time horizon is 10-15 years on this one, if not longer. I'd feel really stupid if I didn't take advantage of this weakness. I don't need to low tick it.
The market is assuming that their reported numbers aren't real. Management has responded to the concerns, but investors are deciding to assume that the numbers aren't real until they see otherwise. They want to see receivables come down, and want to see them monetize EROS Now.
I think what investors are missing is that this is a market opportunity story. Their content is clearly real, the market is clearly real, therefore I'm not worried about it as a long term investor. I believe they will eventually be able to monetize their content. We already know they are free cash flow negative, so I don't think management is hiding anything. I could be wrong, as always we will find out with time. The technicals are terrible so I'm just waiting for the ugliness to end, hope it goes lower so I can buy it cheaper.
I've got no idea. I'm not sure anyone does. This is completely unchartered territory as the FCC has never held an auction like this. Some of the analysts have come out with a couple of a hundred million but I think they've go their finger in the wind and don't have a clue either.
Yes, but I think it's safe to assume that most will just go off the air or share a signal with someone else, I don't think many will choose the moving option. Just a guess. Remember if you go off the air that doesn't mean your station goes dark, it means you just distribute through the cable and satellite guys and not over the air.
I could be wrong, but I calculated the opening bids from the FCC at just over $3.2b. Have the top stations in Boston and Santa Barbara. Remember this is a reverse auction, so the prices only go lower from here. My #'s could be wrong, did it quick.
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.