The stations are being acquired from Gray Television Group, Inc. (NYSE:GTN and GTN.A) (“Gray”) and Excalibur Broadcasting, LLC (“Excalibur”) and represent the equity interests of certain subsidiaries of Hoak Media, LLC ("Hoak"), and Parker Broadcasting, Inc. ("Parker") which Gray and Excalibur previously agreed to purchase from Hoak and Parker, respectively.
Under the terms of the agreements, Nexstar will acquire five stations from Gray, and Mission will acquire one station from Excalibur (see table below). Nexstar will fund $33.5 million of the purchase consideration and Mission will fund the $4 million balance. The acquisitions will be funded through internal sources, borrowings under the existing credit facilities and future credit market transactions.
The stations include WMBB (ABC), Panama City and five stations in Colorado; KFZX, KREZ, KREG, KREY, and KGJT.
The planned station acquisitions will again expand Nexstar’s and Mission’s local television broadcasting and digital media platforms with stations that are complementary to their operating base and present significant financial and operating synergies. Upon closing these and other previously announced transactions (and reflecting the dissolution of Nexstar’s JOA in Rochester, NY at year-end) Nexstar’s portfolio of stations that it owns, operates, programs or to which it provides sales and other services, will increase to 108 stations in 56 markets reaching approximately 16.0% of all U.S. television households.
In the first twelve months following the closing of the transactions, the acquired stations are expected to generate approximately $7 million in adjusted Broadcast Cash Flow and are expected to provide free cash flow accretion in the first two years of ownership of approximately $0.12 to $0.15 per share per year (definitions and disclosures regarding non-GAAP financial information are included later in this announcement). The purchase price for the six stations represents a multiple of approximately 5.9 times the expected average 2013/2014 broadcast cash flow of the acquired stations after giving effect to anticipated operating improvements and synergies identified by Nexstar.
Perry A. Sook, Chairman, President and Chief Executive Officer of Nexstar Broadcasting Group, Inc., commented, “Since July 2012, Nexstar has doubled the portfolio of television stations that it owns or provides services to as we and Mission acquired or agreed to acquire 53 television stations for a total value of approximately $863 million. Significantly, all of these transactions are accretive to free cash flow, strategically diversify our and Mission’s revenue and operating base and create additional duopolies or virtual duopolies. The agreements to acquire stations in Grand Junction and Panama City mark our entrée into these markets and upon completing all announced transactions, we will own or provide services to multiple stations in 37 of the 56 markets where we will operate.
“By adhering to our disciplined acquisition criteria, we are acquiring these six stations at an attractive pro-forma multiple of broadcast cash flow and have identified significant synergies with well-defined paths to realization. From a balance sheet perspective, these transactions are not expected to alter our expectation that Nexstar will end 2014 with net leverage in the mid-3x range. As a result, pro-forma for the completion of all announced and completed transactions, we believe Nexstar will generate free cash flow in excess of $350 million during the 2014/2015 cycle, or average pro-forma free cash flow of approximately $5.85 per share per year, in the upcoming two year period.”
The transactions are subject to Federal Communications Commission approval, the consummation of the Gray-Hoak transaction and other customary closing conditions, and are expected to be completed in the first quarter of 2014.
See the full press release here.