Business Context and Reporting Period
This Form 8-K, filed on December 4, 2018, reports on events occurring on November 30, 2018. Nexstar Media Group, Inc. ("Nexstar") entered into a definitive Agreement and Plan of Merger to acquire Tribune Media Company ("Tribune"). The transaction involves a merger of a Nexstar subsidiary with Tribune, resulting in Tribune becoming a wholly-owned subsidiary of Nexstar.
Key Financial Metrics and Transaction Terms
- Merger Consideration: $46.50 in cash per share of Tribune Class A and Class B common stock.
- Delayed Closing Adjustment: If the merger does not close by August 31, 2019, the consideration increases by approximately $0.30 per month (specifically $0.009863 per day) until closing, net of dividends declared after the adjustment date.
- Equity Awards Treatment:
- Options: Cancelled and converted to cash equal to the excess of the merger consideration over the exercise price.
- RSUs: Vested RSUs converted to cash; unvested RSUs granted after December 1, 2018, are cancelled for no consideration.
- PSUs: Immediately vested at target performance levels and converted to cash.
- Warrants: Assumed by Nexstar and converted to warrants exercisable for the merger consideration.
- Debt Financing Commitment: Nexstar secured commitments for the following facilities to fund the transaction:
- $500 million incremental senior secured term A loans.
- $3,600 million incremental senior secured term B loans.
- $1,140 million senior secured short-term term facility.
- Up to $1,120 million senior unsecured bridge facility.
- Termination Fees:
- $135 million payable by Tribune to Nexstar if Tribune enters into a superior proposal or under certain other termination scenarios.
- Up to $15 million reimbursement of Nexstar's expenses if Tribune stockholders do not approve the merger.
Financial Performance: This filing does not provide specific revenue, profit, cash flow, or margin data for Nexstar or Tribune. It focuses exclusively on the terms of the merger agreement and financing.
Material Changes and Conditions
The primary material change is the entry into the Merger Agreement. The transaction is subject to several conditions, including:
- Approval by Tribune stockholders.
- Receipt of Federal Communications Commission (FCC) approval.
- Expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
- Absence of legal impediments to consummation.
- Accuracy of representations and warranties and performance of covenants.
The merger does not require Nexstar stockholder approval and is not subject to financing contingencies.
Outlook, Risks, and Contingencies
Timeline: The agreement includes an end date of November 30, 2019, with an automatic extension to February 29, 2020, if necessary to obtain regulatory approval.
Regulatory and Divestiture Risks: Nexstar has agreed to use reasonable best efforts to obtain regulatory approval, which may require "station divestitures" and other "approval actions."
Forward-Looking Risks: The filing highlights risks regarding the timing of the transaction, failure to satisfy closing conditions, regulatory delays or conditions, financing availability, integration challenges, advertising pricing fluctuations, and programming cost volatility.
Non-Solicitation: Tribune has agreed not to solicit alternative proposals, subject to a "fiduciary out" allowing them to consider a superior proposal if required by fiduciary duties, provided they pay the termination fee and allow Nexstar matching rights.
Investor Verification Checklist
- Verify the status of FCC and antitrust regulatory approvals required for the merger.
- Confirm the final terms of the debt financing syndication, as economic terms are subject to change.
- Monitor Tribune stockholder voting results for the merger approval.
- Review the specific "station divestitures" required to satisfy regulatory conditions.
- Assess the impact of the $135 million termination fee on Tribune's balance sheet if the deal fails due to a superior proposal.
- Check for any material adverse effects on Tribune's business since the signing of the agreement.