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· (Reuters) - Buyout
firm Apollo Global Management LLC (APO.N)
has approached Nexstar Media Group Inc (NXST.O),
an operator of television stations that reach nearly 40 percent of U.S.
households, to express interest in acquiring it, according to people familiar
with the matter.
The approach comes a year after Nexstar’s $2.3
billion acquisition of peer Media General Inc turned it into one of the largest
U.S. broadcasters. Nexstar wants to add scale as advertisers move their
spending to digital and mobile platforms.
Apollo has teamed up with P2 Capital Partners
LLC, another investment firm that already owns a small stake in Nexstar, the
sources said this week. Nexstar has not yet engaged in sale talks and there is
no certainty it will entertain an offer, the sources added.
The sources asked not to be identified because
the deliberations are confidential. Apollo declined to comment while Nexstar
and P2 did not immediately respond to requests for comment.
The possibility of a deal sparked a 15 percent
jump in Nexstar shares. They later eased to trade up 5 percent at $81.95,
giving the company a market capitalization of $3.8 billion.
Based in Irving, Texas, Nexstar has a
portfolio of 169 TV stations reaching 100 regional advertising markets that are
affiliated with NBC, CBS, ABC, FOX, MyNetworkTV and The CW.
Nextstar generated adjusting earnings of $743
million last year, up 83 percent year on year, and $469 million in free cash
flow, making it an attractive asset for private equity buyers.
Nexstar made an offer
for peer Tribune Media Co (TRCO.N)
last year, but lost out to Sinclair Broadcast group (SBGI.O),
which clinched a deal for $3.9 billion.
Nexstar is nominally at the limit of a cap by
the U.S. Federal Communications Commission (FCC), which restricts TV station
ownership to no more than 39 percent of U.S. television households.
However, the FCC is considering rescinding the
rule, though it has yet to vote on the matter. Last year, it also changed the
rules in which TV stations are counted toward that cap. The change paved the
way for Sinclair, the largest U.S. television broadcast group with 192
stations, to ink a deal for Tribune.
Sinclair and Tribune are still waiting for the
FCC to clear their deal. Sinclair said in April it would divest 23 stations to
win approval.
P2 Capital has a history of buying small
stakes in publicly listed companies and then seeking to partner with private
equity firms to acquire them. Earlier this year, it teamed up with buyout firm
Silver Lake to take U.S. financial technology company Blackhawk Network
Holdings Inc private for $3.5 billion.
Reporting by Pamela
Barbaglia in London and Greg Roumeliotis in New York; Additional reporting by
Liana B. Baker in New York; Editing by Jeffrey Benkoe
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