Nexstar still in acquisition mode, could spend $650 mln over two years

Thu Jun 20, 2013 8:36am EDT

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(Reuters) - Serial acquirer Nexstar Broadcasting Group Inc is in talks with several companies to buy TV stations and could spend up to $650 million on acquisitions over the next two years, founder and Chief Executive Perry Sook told Reuters.

Sook said some stations run by Local TV LLC could fit the bill, but declined to say whether his company was in talks with owner Oak Hill Capital Partners.

"At the right price I think we would be interested in a number of those assets but certainly not all," Sook said in an interview on Wednesday.

Credit Suisse analyst Michael Senno has identified Nexstar as a likely buyer if Local TV is broken up as part of a sale.

Sook, 54, who set up Nexstar in 1996 with a single station in Pennsylvania, said his company has closed or announced acquisitions worth about $650 million over the last 24 months.

"I think we have the capability to do that much again over the next two years," he said.

That said, Nexstar -- which has considered selling itself twice since 2007 -- would consider a buyout offer if a substantial premium was offered, Sook said.

The U.S. TV broadcasting industry is experiencing a buyout boom. Gannett Co Inc, the nation's biggest newspaper publisher, highlighted the rush for assets last week with a deal to buy Belo Corp for $1.5 billion.

Still, Sook said the industry's rush to consolidate has not driven up valuations. "Valuations have come back to a range of approximately 8-10 times cash flow. Right now, everything is being transacted at the lower end of that range, or 8-9 times."

Nexstar posted an annual profit in 2012 for the first time since its 2003 initial public offering as acquisitions paid off, retransmission fees rose more than 60 percent and advertising income increased as a result of the presidential election.

The company, which owns or operates 72 stations, including affiliates of ABC, CBS, FOX and NBC, also initiated a quarterly dividend in the first quarter of 2013.

Nexstar's shares have risen more than 400 percent in the last year, closing at $33.77 on Wednesday.

Of the seven analysts tracking the company, five have a "buy rating" on the stock and two a "strong buy", according to Thomson Reuters data.

Sook, who led the 2005 campaign for higher retransmission fees paid to broadcasters by cable and satellite TV companies, said there was still room to increase rates.

"There is still a tremendous inequity of the value of our signals to the package the MVPD (multichannel video programming distributor) is reselling to the consumers versus the share of value that we are receiving," he said.

Retransmission fees have become an important source of income for Nexstar and other broadcasters such as Sinclair Broadcast Group Inc and Cox Media Group as audience numbers decline and advertising revenue falls.

Nexstar's retransmission fee revenue jumped 64 percent to $23.8 million in the first quarter ended March 31 from a year earlier.

Sook said he saw no threat from upstart services such as that offered by Aereo Inc, the Barry Diller-backed company that captures broadcast signals and streams the content to customers without paying broadcasters.

"We spend a lot of time talking about Aereo, but we spend very little time worrying about Aereo ... I don't think Aereo will have any material impact on our business in any way, shape or form," Sook said.

The U.S. broadcasting industry, led by Walt Disney Co's ABC, CBS Corp, Comcast Corp's NBCUniversal and News Corp's Fox, is worried that Aereo will disrupt its business model but their attempt to temporarily block the service was rejected by a U.S. court.

"I believe if Barry Diller's name weren't attached to the product, we would all be spending a lot less time talking about it," Sook said.

(Editing by Ted Kerr)

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