(Reuters) - Nexstar Media Group Inc (NXST.O) said on Monday it had agreed to buy Chicago-based peer Tribune Media Company TRCO.N for about $4.1 billion in cash, a deal that would make it the largest regional U.S. TV station operator.
Nexstar said it would pay $46.50 per share, representing a premium of 15.5 percent to Tribune’s closing price on Friday. Tribune shares closed up 11.7 percent at $44.98 on Monday and Nexstar shares closed up 6.9 percent.
The value of the deal was in line with a Reuters report on Sunday.
Including debt, the transaction is worth $6.4 billion.
In August, Sinclair Broadcast Group Inc’s (SBGI.O) attempt to buy Tribune in a $3.9 billion deal collapsed over regulatory hurdles.
However, since then the broadcast media sector has seen a flurry of merger talks, amid expectations that the U.S. Federal Communications Commission (FCC) could relax restrictions on how many stations broadcasters can operate.
Irving, Texas-based Nexstar said the transaction was subject to approvals by Tribune’s shareholders and regulators including the FCC. The company intends to divest certain television stations necessary to comply with regulatory ownership limits.
Nexstar owns, operates and provides sales and other services to 174 television stations reaching nearly 39 percent of all U.S. television households, while Tribune Media owns or operates 42 local television stations reaching approximately 50 million households.
The deal prompted concern in the U.S. Congress, where Senator Richard Blumenthal, a Democrat from Connecticut, warned that the proposed merger could lead to less local news production.
“The snowballing consolidation of local stations has too often endangered hard-hitting investigative journalism, replacing local journalists with identical cookie cutter segments dictated from far away,” he said.
“The FCC has a mandate to protect community-based news reporting and diverse points of view before approving this acquisition.”
Nexstar outbid private equity firm Apollo Global Management LLC (APO.N) with an all-cash offer, three sources had told Reuters.
The deal, expected to close late in the third quarter of 2019, will add about $160 million in the first year to Nexstar’s earnings, the companies said.
“The transaction will result in approximately 46 percent growth in Nexstar’s average annual free cash flow in the 2018-2019 cycle to approximately $900 million,” Nexstar’s chief executive officer Perry Sook said in a statement.
Nexstar said it had received committed financing for the transaction from BofA Merrill Lynch, Credit Suisse and Deutsche Bank.
“We think this is a great acquisition for Nexstar that would position them to be the dominant player in the space,” said Benchmark Co analyst Daniel Kurnos.
Reporting by Arjun Panchadar and Sonam Rai in Bengaluru, additional reporting by Diane Bartz in Washington; Editing by Shailesh Kuber and Rosalba O'Brien