IRVING, Texas--(BUSINESS WIRE)--Nexstar Broadcasting Group, Inc. (Nasdaq:NXST) (“Nexstar”) announced today that it and Mission Broadcasting, Inc. (“Mission”) entered into definitive agreements to acquire five television stations in four markets for total consideration of $103.25 million in transactions that are expected to be immediately accretive in the first full year of operations following closing.
Under the terms of the purchase agreements, Nexstar will acquire stations in Des Moines, Iowa, Rock Island, Illinois and Sioux City, Iowa from entities related to Citadel Communications, L.P. for $88 million and will immediately begin operating the three stations pursuant to a Time Brokerage Agreement. The Des Moines station will be acquired pursuant to a stock purchase agreement while the Rock Island and Sioux City station acquisitions are structured as asset purchase agreements. Mission will acquire two stations in Binghamton, New York from Stainless Broadcasting, L.P. for $15.25 million in a transaction structured as an asset purchase agreement. The acquisitions will be funded through internal sources, borrowings under the existing credit facilities and future credit market transactions.
The planned station acquisitions will further expand Nexstar’s local television broadcasting platform with stations that are geographically complementary to Nexstar’s operating base and present significant financial and operating synergies. Upon closing this and other previously announced transactions, Nexstar’s portfolio of stations that it owns, operates, programs or to which it provides sales and other services will increase to 96 stations in 51 markets reaching approximately 14.6% of all U.S. television households.
In the first twelve months following the closing of the transaction, the five acquired stations are expected to contribute approximately $35 million in incremental net revenue. Giving effect to approximately $3 million in projected synergies, the acquisitions are expected to generate over $17 million in additional broadcast cash flow and are expected to provide free cash flow accretion in the first year of approximately 5% over the levels expected to be generated by Nexstar’s existing operations and other previously announced acquisitions (definitions and disclosures regarding non-GAAP financial information are included later in this announcement). The purchase price for the five stations represents a multiple of approximately 6.0 times the expected 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, “Our and Mission’s planned acquisition of five stations in four markets builds further scale and operating and financial leverage and represents another excellent opportunity to expand our platform in attractive, highly complementary markets. These transactions are consistent with our criteria for acquisitions that are accretive to free cash flow, further strategically diversify our revenue and operating base, create opportunities for virtual duopolies and present significant synergies with well-defined paths to realization. Under Nexstar and Mission’s ownership the stations will realize additional retransmission revenues as well as synergistic operating improvements, and on a pro-forma basis the acquisitions will be accretive to results and leverage neutral on a debt-to-cash-flow basis.
“Pro-forma for the completion of the transactions announced today and other soon-to-be completed transactions, we believe Nexstar will generate free cash flow of approximately $315 million in the 2014/2015 cycle, representing an increase of approximately 5% over our prior expectations. This would amount to average pro-forma free cash flow of approximately $5.25 per share per year in the 2014/2015 period. Based on our current financing plans as well as the significant free cash flow to be generated following our other recent acquisitions, we continue to expect net leverage in the mid-3x level at year-end 2014.
“Additionally, these stations are an excellent complement to our existing station portfolio in terms of market size and geographic alignment with Nexstar’s existing operating hubs, while offering the potential to develop additional virtual duopolies. The acquisition of the Des Moines and Sioux City stations marks Nexstar’s entrée into Iowa, an important state for political advertising activity, while the Rock Island station also reaches Iowa and will benefit from efficiencies related to Nexstar’s existing operations in Illinois where we now operate or provide services to six stations. At the same time, Mission’s acquisition of two stations in Binghamton enhances our overall presence in central/western New York where we currently operate or provide services to ten stations.”
Mr. Sook concluded, “Nexstar’s ongoing operating execution combined with select accretive station transactions have positioned the Company to achieve record revenue and free cash flow in 2013 and beyond. In the current environment we expect to act on further opportunities to optimize our portfolio through additional strategic acquisitions, the creation of additional virtual duopolies, and select divestitures.”
| Citadel Communications and Stainless Broadcasting Television Stations | |||||||||||||||
| Market | Market Rank | Station | Affiliation | Seller | |||||||||||
| 1 | Des Moines, IA | 72 | WOI | ABC | Citadel Communications | ||||||||||
| 2 | Rock Island, IL | 99 | WHBF | CBS | Citadel Communications | ||||||||||
| 3 | Sioux City, IA | 147 | KCAU | ABC | Citadel Communications | ||||||||||
| 4 | Binghamton, NY | 157 | WICZ | FOX | Stainless Broadcasting | ||||||||||
| 5 | Binghamton, NY | 157 | WBNP- LP | MyNetworkTV | Stainless Broadcasting | ||||||||||
The transactions are subject to Federal Communications Commission approval and other customary closing conditions, and are expected to be completed early in the first quarter of 2014.
Definitions and Disclosures Regarding non-GAAP Financial Information
Broadcast cash flow is calculated as income from operations, plus corporate expenses, depreciation, amortization of intangible assets and broadcast rights (excluding barter) and loss (gain) on asset disposal, net, minus broadcast rights payments.
Free cash flow is calculated as income from operations plus depreciation, amortization of intangible assets and broadcast rights (excluding barter), loss (gain) on asset disposal, net, and non-cash stock option expense, less payments for broadcast rights, cash interest expense, capital expenditures and net cash income taxes.
Broadcast cash flow and free cash flow results are non-GAAP financial measures. Nexstar believes the presentation of these non-GAAP measures are useful to investors because they are used by lenders to measure the Company’s ability to service debt; by industry analysts to determine the market value of stations and their operating performance; by management to identify the cash available to service debt, make strategic acquisitions and investments, maintain capital assets and fund ongoing operations and working capital needs; and, because they reflect the most up-to-date operating results of the stations inclusive of pending acquisitions, TBAs or LMAs. Management believes they also provide an additional basis from which investors can establish forecasts and valuations for the Company’s business.
About Nexstar Broadcasting Group, Inc.
Nexstar Broadcasting Group is a leading diversified media company that leverages localism to bring new services and value to consumers and advertisers through its traditional media, e-MEDIA, digital and mobile media platforms. Nexstar owns, operates, programs or provides sales and other services to 72 television stations and 13 related digital multicast signals reaching 41 markets or approximately 12.1% of all U.S. television households. Nexstar’s portfolio includes affiliates of NBC, CBS, ABC, FOX, MyNetworkTV, The CW, Telemundo, and Bounce TV, the nation’s first over-the-air broadcast television network programmed for African-American audiences and two independent stations. Nexstar’s 43 community portal websites offer additional hyper-local content and verticals for consumers and advertisers, allowing audiences to choose where, when and how they access content while creating new revenue opportunities.
Pro-forma for the completion of all announced transactions Nexstar will own, operate, program or provides sales and other services to 96 television stations and related digital multicast signals reaching 51 markets or approximately 14.6% of all U.S. television households.
Forward-Looking Statements
This news release includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements include information preceded by, followed by, or that includes the words "guidance," "believes," "expects," "anticipates," "could," or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained in this news release, concerning, among other things, changes in net revenue, cash flow and operating expenses, involve risks and uncertainties, and are subject to change based on various important factors, including the impact of changes in national and regional economies, our ability to service and refinance our outstanding debt, successful integration of acquired television stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, future regulatory actions and conditions in the television stations' operating areas, competition from others in the broadcast television markets served by the Company, volatility in programming costs, the effects of governmental regulation of broadcasting, industry consolidation, technological developments and major world news events. Unless required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this news release might not occur. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission.
