Nexstar Broadcasting Group Inc offered to buy Media General Inc (MEG.N) in a $4.1 billion deal that could derail Media General's planned acquisition of Meredith Corp (MDP.N).
Nexstar, whose private offer for Media General on Aug. 10 was rejected, said on Monday that the deal would create the second-biggest local TV station operator in the United States.
Media General shares rose as much as 27 percent to $14.15, below Nexstar's cash-and-stock offer of $14.50 per share.
Shares of Meredith, which Media General offered to buy this month for about $2.34 billion to create the No.3 U.S. regional TV operator, fell about 6 percent. Nexstar shares rose 2.6 percent.
Analysts said Media General's combination with Nexstar was more compelling than a deal with Meredith.
"We had seen the MEG/MDP deal as modestly accretive, but this deal appears to be more accretive with less cashflow leakage and would be a pure play broadcaster," Evercore analyst Tracy Young wrote in a note.
At a time when most media companies are grappling with falling print revenue, Media General will have to acquire magazines such as Family Circle and Better Homes and Gardens if it buys Meredith.
"It is illogical that Media General's board has refused to engage with us and has instead pursued an ill-conceived and value-destructive acquisition of Meredith that would once again expose Media General shareholders to the risks of the low-margin publishing business," Nexstar Chief Executive Perry Sook said.
Nexstar said its shareholders would hold about 74 percent of the combined company, with Media General's shareholders holding the rest. The combined company is expected to generate pro-forma annual free cash flow of more than $450 million, it said.
The combined company will reach 39 percent of all U.S. television households and own 162 stations in 99 markets.
The deal will result in synergies of at least $75 million in the first year compared with $60 million in the case of a Media General-Meredith combination, Nexstar said.
Nexstar is "prepared to make the necessary divestitures" to get regulatory approval for the deal, Sook said on a conference call.
Media General said it was reviewing the proposal and that its board still recommended the Meredith deal.
RBC Capital Markets is Media General's financial adviser for the deal and Fried, Frank, Harris, Shriver & Jacobson LLP its legal counsel. BofA Merrill Lynch is Nexstar's financial adviser and Kirkland & Ellis LLP its legal counsel.