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Media General Shareholder Pushes For Rejection of Meredith Deal

One of Media General’s largest shareholders has urged the company to back away from a proposed deal that would have it acquire Meredith Corp., the latest maneuver to upset the transaction in the wake of rival interest in the Richmond, Va., TV-station owner from broadcaster Nexstar Broadcasting Group.

Nexstar on Monday offered to buy Media General for about $1.85 billion in cash and stock, which, with Media General debt added, would value the company at about $4.1 billion. The move that seeks to thwart Media General’s own effort to buy Meredith Corp. for $2.4 billion, a deal that would have management from Meredith take over the newly merged concern.

“Effectively, Media General agreed to pay a significant premium to acquire a larger company with a less desirable business mix and then hand over management control to the target’s management team,” said a letter from Starboard Value LP, an investment firm that has purchased 4.5% of Media Generals’ shares, sent to Media General’s board of directors. ” This type of transaction structure is unconventional, at best, and upon closer investigation, appears to be contrary to the best interests of your shareholders.”

Media General shares have slumped since it unveiled its plan to merge with Meredith.

One objection raised by Starboard is that a deal with Meredith would saddle Media General with a portfolio of magazines and other print outlets, which Media General has sought to exit. Meredith owns a passel of TV stations and also publishes war horses like “Better Homes & Gardens” and “Ladies’ Home Journal,” among others.

“Media General chose to exit the low-growth and low-margin newspaper business in 2012 and indicated to its shareholders at that time that the Company would remain focused on growing its broadcast business going forward.  However, the Meredith transaction, if consummated, would bring Media General back into the publishing business given that approximately 66% of Meredith’s revenue is generated from its publishing business while only approximately 34% of Meredith’s revenue is generated from its broadcast business,” Starboard said in its letter.

Media General said yesterday in a statement that it would review the Nexstar proposal but added that its board of directors continued to recommend the transaction with Meredith.

Nexstar’s hostile bid underscores a burgeoning interest in TV stations as the media industry continues to be roiled by new technology. With new digital outlets siphoning ad dollars away from TV, media companies see value in local TV stations. An  offer for Media General, if consummated, would be the fourth largest TV station deal in history and the largest since 1999, according to data from SNL Kagan, a market-research firm. The pact would “create an entity with significant geographic synergies for both retransmission consent and affiliation negotiations,” Kagan said.

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