Broadcast station M&A volume reached $3.04 billion in the third quarter of 2015 with Radio deal volume of $434.0 million while TV registered deals worth $2.61 billion. The total is more than twice the combined amount registered in the previous three quarters. Year-to-date, at the end of September, radio registered a total of $675.3 million while TV deal announcements amounted to $2.75 billion.
Between Q1 2013 and Q3 2014 we registered seven consecutive quarters with deal volumes above $1 billion, mainly driven by large TV consolidation deals. Starting in Q4 2014, deal activity slowed dramatically. Between October 2014 and August 2015, we did not register a single deal above $100 million. In the past quarter, five such transactions were announced.
Due to a number of high-ranking TV deals, the TV broadcast cash flow multiple on two-year average forward cash flow rose from 8.0x at the end of Q2 to 8.3x at the end of Q3. The radio multiple remained unchanged at 6.7x.
The quarter's top deal announcement by far was the possible next giant leap in TV consolidation, Media General Inc.'s $3.1 billion acquisition of Meredith Corp. At a 9.1x multiple of seller's 2016/2017 broadcast cash flow, we value the 17 TV stations in 13 markets at $1.81 billion, which would make the deal the TV sector's largest since Media General's purchase of LIN Media LLC in March 2014.
However, this transaction might not take place, if Media General's shareholders agree to a takeover bid by Nexstar Broadcasting. Nexstar sent an unsolicited offer on September 28, to buy all of Media General for $14.50 per share or $4.1 billion. On November 16, Media General Board unanimously rejected Nexstar’s offer and said it will continue negotiations while recommending moving forward on the Meredith $3.1 billion transaction.
On December 9, Nexstar announced a revised proposal of approximately $4.3 billion at $16.31 per share which was also rejected by Media General’s Board while sending its own counter proposal of $18.61 per share valued at $4.6 billion which Nexstar rejected. Recent reports on December 10 indicated Nexstar is planning on entering into a proxy fight with Media General’s Board nominations starting on December 28.
While the Media General/Meredith deal would affect mainly top- and mid-sized markets, another large TV station buyer, Gray Television Inc., extended its small-market foothold in Q3, paying $100.0 million for Gazette Company's only TV station in Cedar Rapids, Iowa, and $442.5 million for Schurz Communications Inc. At 8.5x forward broadcast cash flow, SNL Kagan allocated a deal value of $420.5 million to Schurz's 15 TV stations and two local marketing agreements in seven markets.
Also expanding by means of a deal valued at more than $100 million was Raycom Media Inc., which paid $160.0 million for Drewry Communications Group's seven TV stations (including one local marketing agreement).
Q3's top M&A news from the radio station sector was the merger of Alpha Media LLC and Digity LLC. Alpha Media paid $264 million for Digity's 116 stations, which SNL Kagan estimates translates to year-forward seller's cash flow multiples of 6.8x for the FM and 6.3x for the AM stations.