Nexstar announcement seen as boost for TV M&A


With Nexstar formally announcing that it is for sale, Wells Fargo Securities analyst Marci Ryvicker is calling it “a positive” for the TV sector. In her view, “transformative M&A is occurring” in television.

“As of July 21 four station groups are known to be on the block: Nexstar, McGraw-Hill, Freedom, and Young Broadcasting. While there is significant supply we believe potential bidders will include both strategic and private equity groups – both of which we believe are looking hard at these assets,” Ryvicker told clients.

Based on the Wednesday Wall Street Journal online report that Nexstar is expected to sell for more than $1 billion, Ryvicker calculates a blended 2011-2012 estimated EBITDA multiple of 8.8 times.

“We believe today’s news is a positive for the broadcast TV space as it provides multiple support (given the reported possible $1B+ sale price),” wrote Ryvicker, who then turned to the potential valuations for two pure-play TV companies in her coverage portfolio: Belo and Sinclair. “BLC and SBGI are currently trading at 6.5x and 7.1x blended 2011E/2012E EV/EBITDA respectively — applying an 8.8x multiple to these two companies would result in stock valuations of approximately $12.25 (+70%) for BLC and $16.25 for SBGI (+66%), reaffirming our Outperform ratings,” the analyst said.

RBR-TVBR observation: Of those four groups up for sale, Nexstar is far and away the largest. Thus, the $1 billion-plus price tag. McGraw-Hill’s four-station TV group is a small part of a much larger public company, which put the TV unit up for sale last month.

Look for a price approaching $400 million. Both Freedom and Young are owned by investment funds with no long-term commitment to broadcasting, since both recently emerged from Chapter 11 reorganization.

The most recent speculation is that Freedom’s eight TV stations might fetch around $400 million after a deal to sell the entire TV/newspaper company fell apart on pricing.

To date, Young’s sale efforts have been very hush-hush, although the expected price for the 14 stations is said to be far less than half the $820 million that Young paid for KRON-TV San Francisco alone in the biggest single station sale ever a little over a decade ago.