Nexstar Media Group Inc. has agreed to buy Tribune Media Co. in a $4.1-billion deal that would create the nation’s largest owner of local television stations, the companies announced Monday.
Irving, Texas-based Nexstar — whose portfolio is composed of 174 stations, including affiliates of NBC, CBS, ABC and Fox — outbid private equity giant Apollo Global Management with an all-cash offer of $46.50 a share. Nexstar will also assume $2.3 billion of Tribune Media’s debt.
The deal comes during a wave of consolidation in the media industry. Companies are feeling pressure to increase scale so they can stay competitive with emerging digital media players.
Chicago-based Tribune Media owns and operates 42 local stations reaching about 50 million households, including Los Angeles outlet KTLA-TV Channel 5. The deal also includes Tribune Media’s cable network WGN America; a 31% stake in the Food Network; and real estate holdings.
The acquisition will give Nexstar a presence in the three largest TV markets — New York, Los Angeles and Chicago, where Tribune has its flagship station, WGN.
Nexstar expects the deal to close in the third quarter of 2019.
Tribune Media would be Nexstar’s second major acquisition in recent years. Nexstar, founded 22 years ago, completed a $4.6-billion deal to buy station group owner Media General in January 2017.
Nexstar executives believe the acquisition would enhance their company’s position as a local media firm by increasing geographic reach. Local TV stations benefit from political advertising spending — which is expected to be robust in 2020 — and fees paid by cable and satellite companies that provide them to subscribers.
Nearly four months ago, a plan for Tribune Media to sell itself to Sinclair Broadcast Group collapsed after the deal became a regulatory and political flashpoint for the companies.
Sinclair had proposed to pay $3.9 billion for Tribune Media. But Federal Communications Commission Chairman Ajit Pai expressed “serious concerns” about how Sinclair planned to divest some Tribune stations to meet the national cap on TV-station ownership. Pai’s move was a surprise because he largely has been friendly toward consolidation and deregulation.
Separately, the Sinclair deal also had been heavily criticized by liberals who believed the firm would use the clout of its expanded national reach to launch a conservative-leaning news service to compete with Fox News Channel. Sinclair has required local news shows on its stations to run segments favorable to President Trump, and on at least one occasion it had local news anchors nationwide recite a script that echoed some of the president's talking points. (Nexstar, meanwhile, does not have a reputation for exerting central editorial influence over the content of local news programming.)
In August, Tribune Media filed a breach-of-contract lawsuit against Sinclair, alleging that Sinclair failed to make its best effort to gain regulatory approval of the sale.
Nexstar’s $46.50-a-share offer is slightly more than the $43.50 a share, in a combination of cash and stock, that Sinclair had offered to pay. Tribune Media shares jumped 11.7% to $44.98 on Monday. Nexstar shares climbed 6.9% to $88.32.
In a conference call Monday, Nexstar Chief Executive Perry Sook said he has spoken to Pai and assured him the company will divest stations to comply with the FCC’s ownership regulations. Nexstar has identified 15 markets where it will have to sell stations to meet ownership limits.
Sook said the Tribune assets have performed better since Nexstar first considered buying the company in mid-2017. “The company is in a much better position now,” he said.
Sook said Nexstar has identified $160 million in “synergies” — essentially potential cost savings from overlapping operations — that can be realized in the first year of the merged companies.