Nexstar Broadcasting Group announced agreements with Marshall Broadcasting Group for the sale of three network affiliated stations in three markets for $58.5 million. MBG intends to fund the station acquisitions via credit which Nexstar has agreed to guarantee.
Under the terms, MBG will acquire three full-powered, FOX affiliated stations, KMSS-TV, KPEJ-TV and KLJB (TV) in Shreveport, LA, Odessa-Midland, TX and Quad Cities, IA, respectively.
Said Perry Sook, Nexstar CEO: “We believe the proposed transaction announced today presents an ideal framework for introducing and incubating a new, minority-controlled entrant to broadcasting, and for bringing additional news, information and specialized programming to MBG’s markets at the earliest possible opportunity.”
The transactions are subject to the consummation of Nexstar’s previously announced agreements to acquire the stock of privately-held Communications Corporation of America and White Knight Broadcasting (CCA) and the stock of Grant Company and are expected to be completed in 2014.
Subject to regulatory approval, MBG intends to assume the obligations of Mission as the acquirer of the stations under various asset purchase agreements currently in effect between Nexstar and Mission.
MBG is a newly formed minority owned media entity owned 100% by Pluria Marshall Jr. Mr. Marshall is currently the president and CEO of Equal Access Media Inc., which owns several newspapers serving African-American and minority communities, including The Texas Freeman and Houston Informer Newspapers, The Los Angeles Wave Newspaper Group, and the Los Angeles Independent Publications Group. In 2011, Marshall founded Integrated Multicultural Media Solutions, a media rep firm that assists advertisers and agencies in marketing products and services to multicultural audiences by providing marketing services, including promotions, grassroots marketing, advertising placement and custom content creation.
Marshall is a longtime media exec and civic activist who began his media career in 1979, while in college, with a series of media internships and part-time marketing positions at Cable News Network (CNN) and WXIA-TV in Atlanta, Georgia. Upon graduating, Mr. Marshall participated in a yearlong management development program at WLBT-TV in Jackson, Mississippi which led to his tenure as vice president and general manager at WLBM-TV in Meridian, Mississippi. During his five year tenure at WLBM-TV, Mr. Marshall attempted to become a broadcast station owner four separate times, but each transaction failed to be completed due to the inability to obtain financing. Mr. Marshall subsequently sought to purchase several newspapers from Media General, but was again unable to obtain financing for the purchase. In April 1996, Marshall finally was able to enter the broadcast ownership arena with his purchase of AM broadcast station WLTH, Gary, Indiana, a “news talk” radio station serving Northwest Indiana and the south Chicago suburbs and he continues to own this radio station today. The station was previously financed by an [African American-owned] insurance company in Chicago, and Mr. Marshall’s company assumed the debt and obligations of the previous owner.
“We are delighted to have the support of Nexstar to promote diversity of media ownership assets among minority operators,” said Pluria Marshall. “Over the last 30 years, I’ve devoted significant time and effort in seeking to purchase television and radio stations. The single key factor in each unsuccessful opportunity has been the inability to access the funding necessary for the purchase. On four separate occasions in the late 1980s and early 1990s, we actively pursued, but were unable to obtain financing for station purchases. Over this period, we made contact with at least eight institutional lenders that commonly provide broadcast financing. All of those lenders provided a range of reasons as to why they would not provide financing. With Nexstar’s support and commitment to guarantee financing for the Shreveport, Odessa-Midland and Quad Cities station purchases, we believe we are establishing a new paradigm that addresses recent proposed FCC regulation changes while expanding the opportunity for minority broadcasters to play a greater role in the U.S. broadcasting industry as owners and operators of television stations.”
MBG will be acquiring the FCC licenses and significant assets of the stations, including program contracts, equipment, and real estate interests in connection with studio and tower sites and will enter into agreements whereby Nexstar will provide sales and other non-programming services to MBG. The services agreements will be a critical vehicle for cost savings, allowing MBG to use Nexstar personnel for engineering support, master control, traffic and billing, and other administrative functions that do not relate to control of the stations or their programming.
Under the terms of the proposed services agreements between Nexstar and MBG, MBG will be entitled to 70% of the revenue from advertising sold by Nexstar on the stations and will not provide for any bonus payments to Nexstar for achieving revenue goals. It will not be a fixed-fee payment; as total revenues increase, so does MBG’s share. This transaction structure provides MBG with incentive to seek the best programming and thus maximize station advertising revenue while providing significant cost savings benefits to MBG related to the use of Nexstar resources that are not associated with control of the stations or their programming.
Assisted by the cost savings and efficiencies from its sharing agreements with Nexstar, MBG plans to roll out an aggregate 24.5 hours of additional local news and sports programming on the stations it will acquire, with more to be developed. MBG also intends to develop a minority-oriented public affairs program that will air on its stations and be syndicated to other television stations nationwide. In addition, Nexstar will add 13.5 hours of local news and public affairs programming on the stations it owns in Shreveport, Odessa-Midland and Quad Cities.
Larry Patrick, Managing Partner, Patrick Communications, tells RBR-TVBR: “This deal will hopefully be approved and allow a minority owner to operate three FOX stations. This is what the newly designed waiver of the JSA/SSA processing guidelines is supposed to do–help minorities launch new television companies with the support of experienced broadcast groups. Nexstar should be applauded for creating this opportunity and Pluria Marshall will hopefully build his new company into a successful venture.”
Notes Francisco Montero, Managing Partner, Fletcher, Heald & Hildreth, P.L.C.: “The undercurrent of this transaction is the need of minority broadcasters for capital and financial assistance. A lack of access to capital has always been the primary hindrance for minority broadcasters going back to the 1980s. It’s one of the reaons why Minority Small Business Investment Companies (MSBICs), like BROADCAP were formed in the 1980s and why the minority tax certificate (repealed in the mid-90s) was so critical. It’s also the reason why Pluria Marshall’s recounting of his experiences in broadcast acquisitions and his conclusion that “the single key factor in each unsuccessful opportunity has been the inability to access the funding necessary for the purchase,” is such a well-documented and , unfortunately, all too familiar story. It is so well recognized that the Minority Media & Telecommunications Council has an entire annual conference devoted to “Access to Capital”. In this transaction, the fact that Nexstar has agreed to fund the acquisitions by providing credit guarantees is, no doubt, pivotal. Moreover Nexstar is providing to MBG sales and other non-programming services, like personnel for engineering support, master control, traffic and billing, and other administrative functions. As noted, the service agreements will be “critical” for cost savings. As such, it is ironic that it is precisely these types of relationships that the FCC says will now be given “heightened scrutiny”. An action the NAB has challenged in court as being arbitrary and capricious in violation of the federal Administrative Procedure Act and which prompted FCC commissioners Pai and O’Rielly to say that when the FCC “voted to restrict television broadcasters’ use of joint sales agreements (JSAs), we warned that this decision would lead to ‘less ownership diversity.’ In light of that, it will be interesting to see how the FCC treats this transaction under its new guidelines.”
RBR-TVBR observation: This is great news, in the wake of Sinclair planning to turn in three TV licenses that almost went to minority media owners. Prior to the Commission’s decision to restrict the use of JSAs, Sinclair had a viable buyer for the stations in Charleston and Birmingham: Howard Stirk Holdings (HSH), an African-American owned broadcaster. That deal, however, fell through because of the Commission’s decision to stop Sinclair from entering into JSAs with HSH.
FCC data says African-American ownership of television stations is abysmally low, with African-Americans controlling only 0.7% of all television broadcast stations. This deal will help change that number, if the FCC approves the deal.