Value Investors Club / MEDIA GENERAL INC (MEG)

Description

**** I first published on Media General the week before the Nexstar offer and while I appreciate the strategic logic behind the combination, I believe the offer significantly undervalues Media General. As can be seen below, the cash generating capabilities, NOLs and surplus spectrum yield value well in excess of $14.50. ****

“Seeking Understanding Through the Noise”

Media General

September 2015

Noise surrounding the media space allows for an investment in leading broadcaster

Media General at a 21% free cash flow yield with further upside potential from continued

industry consolidation and the upcoming spectrum auction.

Our best investment opportunities often arise when we can find a deeper understanding through

the noise of the day. The media space has come under great pressure in recent months. There

are countless questions about the long term viability of many business models in the media

landscape. But amidst this noise and uncertainty comes a compelling opportunity to purchase

an enduring broadcasting business at an incredibly high free cash flow yield.

To set the perspective of our approach to investing, we aim to acquire stakes in world class

businesses at a discount to an increasing intrinsic value, allowing for strong future returns with

limited risk of permanent capital loss.

Media General is a nationally leading broadcasting company that owns, operates or services 71

network-affiliated stations in 48 markets and, when combined with its leading digital media

businesses, is one of the largest connected-screen media companies in the country. The

Company’s portfolio of broadcast, digital and mobile products covers 23% of U.S. TV

households and more than two-thirds of the U.S. Internet audience.

The majority of the Company’s stations are with the four major networks: 22 with CBS, 14 with

NBC, 12 with ABC and eight with FOX. The Company also has seven MyNetworkTV stations,

seven CW stations and one Telemundo station.

Media General in its current form came together through the combination of three broadcasters

in recent years. On November 12, 2013 Media General and Young Broadcasting were

combined in a tax-free, all-stock merger and on December 19, 2014 Media General (then

encompassing the Young Broadcasting business as well) merged with LIN Media creating what

is now the current Media General.

The original Media General became a public company in 1969 and has grown through

acquisition purchasing high-quality, privately owned local media entities in the Southeast. The

Company sold all of its newspapers in 2012 to in a deal with Berkshire Hathaway which also

made Berkshire a shareholder in the remaining broadcasting company. Berkshire remains a

shareholder today and has not sold any of its shares in Media General.

The Company also just announced on September 8

anothertransformative merger with

Meredith that will bring total local station count to 88 while enabling the combined entity to cover

30% of US households with free cash flow per share accretion of roughly $0.30 per year, which

is quite material given a roughly $10 current stock price. The proposed merger will also bring

greater heft in the digital arena as Meredith has a portfolio of brands historically tied to

magazines but which in recent years have been used to grow a substantial digital footprint along

with new revenue streams from brand licensing.

Broadcasting is a high returns business that generates large amounts of free cash flow. Local

broadcasters are the preeminent purveyor of highly demanded local news. The dramatic

consolidation in recent years has brought scale to a handful of companies while rendering their

historical financials largely meaningless when considering their current free cash generating

capabilities.

It is important to consider broadcasting results over two years as there are even year spikes in

revenue and cash flow largely attributable to political campaigns. While historical financials

provide an understanding of how the business has performed, it is necessary to value current

pro forma free cash flow given the significance of the Company’s recent acquisitions. Pro forma

for all completed acquisitions and station dispositions, Media General will generate cumulative

free cash flow of $570 million in 2015 and 2016, representing annual average free cash of $285

million. At today’s share count, this equates to average free cash flow per share per year of

$2.20.

Opportunity Summary

With Media General generating an average of $2.20 per share of free cash flow per year on

average in 2015 and 2016 (before the impact of the Meredith merger which would add about

$0.30 per year to that number), a purchase at today’s price around $10.30 equates to an

astounding 21% free cash yield. Moving to a much more reasonable free cash flow yield

of 10% would create a more than doubling in share price. Further upside potential comes

from monetizing its surplus wireless spectrum (conservatively $2 to $4 per share) along with

accretive capital deployment and additional acquisition opportunities (such as the Meredith

merger) given the Company remains well below the FCC ownership cap.

What is Creating the Opportunity?

There is tremendous noise surrounding the media industry and in particular those companies

deriving revenue and earnings from TV-focused business models.

Talk of cord cutting, cord shaving and cord nevers has been a constant topic in recent years but

the airwaves were filled with increasing veracity through the summer after comments by Disney

CEO Bob Iger. Mind you, he actually referenced slower than expected growth from pay TV fees

rather than actual declines, but in a world of severe overreactions to the headlines of the day, a

whirlwind was created and stock prices declined dramatically.

What else happened that week? Discovery disclosed an accelerating high single digit affiliate

fee outlook. CBS revealed a faster ramp to $1 billion in retransmission fee revenues and many

media companies reported a stronger second half advertising environment.

Beyond the news of that week, there has recently been a lot of discussion about declining

ratings across the cable and broadcast TV footprint due in large part to a disaggregation of

linear viewers as viewing is time shifted and moved online.

But what does all this mean for the media industry and specifically Media General? We will

spend considerable time below debunking myths that have plagued the minds of investors. In

short, those companies with must have content will find their video content in continued

demand. How they get paid for this content may change but consumers will retain a desire to

watch great shows, great movies and important news. It is possible that niche audience

oriented content will lose value as skinnier bundles take away some of today’s revenue from

such offerings. But those with the most in demand content will continue to get paid.

What will be the impact on Media General? We already have a good idea of the cash flow

Media General will produce in 2015 and 2016. As we look past these two years, continued

growth in retransmission fees, digital revenue, and political ad spending combined with

enhanced cost controls and merger synergies will driver higher free cash flow above and

beyond 2015/2016 levels. Much of the growth coming from retransmission fees is already

under contract and expense control and synergy plans simply need execution. So we can look

forward and have comfort about continued growth in free cash flow for Media General.

More fundamentally, what provides comfort about the longer term viability of Media General? It

largely comes down to the content of its stations. The big four networks and their local affiliates

will play prominent roles in even the skinniest bundles. ABC, CBS, NBC and FOX are not

niche, small audience cable channels.

Live local programming is a primary revenue driver for Media General and other broadcasters

and has shown to be resilient in the midst of challenges facing media companies more broadly.

In fact, ratings for most local news are actually increasing whereas the declines across cable

have been pronounced and much better documented.

In summary, Media General has a solid and enduring business that generates

tremendous levels of free cash flow and is available today at a wildly attractive valuation.

Before going further, I want to point out three key tenets to the investment thesis with local

broadcasters generally and Media General more specifically:

1. Broadcasters deliver by far the largest audiences across the TV landscape.

2. Local broadcasters in particular have a preponderance of live programming throughout

the day including three large chunks of local news, sports and weather, morning and

daytime talk shows, live sports, live events and late night talk, amongst other

programming viewed in real time. This makes them less reliant on any continued

declines in the linear viewing of scripted primetime programming.

3. Many local broadcasters including Media General trade at by far the best valuations in a

media industry that is already attractive in many other areas. Media General is available

at a greater than 20% free cash flow yield and that, paired with some of the best

underlying business dynamics with continued growth coming from increasing retrans

fees, growing digital revenue streams, accretive M&A and effective capital allocation,

makes for an unusually attractive investment.

TV is Dead, Long Live TV (or at least the local news, sports and programming of the

broadcast networks…)

The decline, even death, of TV has been one of the most discussed topics amongst investors

with the intensity of the discussion gaining yet more steam this summer. But let’s peel back the

headlines and see what is happening with the business of TV.

People are still watching a lot of TV. While that statement may seem benign and even

obvious, sometimes simple statements of truth are needed to gain perspective. As the chart

below illustrates, we are actually watching slightly more hours of TV per day than we were five

years ago. That is a somewhat startling fact given recent headlines.

It should be noted we are also spending much more time on digital devices which is terribly

obvious to all of us. But that does not mean we are watching less TV. Our digital time has

taken from other places including our time conversing face to face.

It also is important to note that local broadcasters, particularly Media General, have strong and

growing digital businesses. In fact, the stability of local news and the big four network TV

business paired with the growth in retrans fees and digital businesses portends continued

growth ahead for Media General.

TV remains the most effective way to reach mass audiences. This is another seemingly

simple and obvious statement that needs to be restated. The broadcast networks in particular

have retained the singular ability to garner large audiences at one time, in one place.

In the eyes of advertisers, TV remains the most influential medium to influence purchase

decisions. As important, the broadcast networks remain the only place to reach mass

audiences. Broadcast networks dominate household ratings and total viewing times. They

house the vast majority of must see viewing including sports, primetime shows, national and

local news and other event based shows drawing massive, real time audiences.

Broadcast network viewing trounces cable viewing. The dominance of broadcast networks

relative to cable holds across day parts and across programming.

The following chart paints two very interesting pictures. The bottom half of this slide from a

recent Sinclair Broadcast presentation starkly reveals how the broadcast networks post

dramatically higher ratings than even the best cable networks. The top half of the slide is even

more compelling for the business side of a broadcasting business. As can be seen, even

though the broadcast networks have substantiallymore viewership, they lag in compensation

received per subscriber. So while they capture more eyeballs, they get paid much less per

subscriber. This is one reason we see secular growth coming from the broadcasters. They can

expect to see higher retrans fees in coming years as they capture more of the value they

deliver.

As can be seen above, broadcast network channels outperform cable throughout the day. In

fact, there are some time periods where cable viewing does not even register. But even in the

best of times for cable, broadcast networks dominate viewing.

The foundation of a network affiliated broadcaster is local news, including local sports and weather. Local news and sports drive much of its revenue and is a highly profitable business with the capability to be leveraged and monetized across many different forms of media. The

charts below lay out how dominant local broadcast news is relative to cable news. The specific

company in question below is Sinclair Broadcast but these results hold across the broadcasting

universe. Sinclair covers less than half of the country still outperforms cable news programming

even as it can be viewed across the entire country. If we were to “nationalize” Sinclair’s local

news ratings as seen in the second bar on each chart, it is clear and obvious that local news

dominates. And again, while this chart is specific to Sinclair, it holds for Media General and

other local broadcasters.

This brings yet more credence to the local broadcasters deserving fair (higher) compensation in

the form of retrans fees from the MVPDs. It also furthers our stance that the broadcast

networks are must have channels in even the skinniest bundles or thinnest online offerings. It is

often said that the three most important aspects of real estate are location, location, location.

The same thesis holds in TV and the broadcast networks of CBS, ABC, NBC and FOX are must

have channels with Class A “locations.”

Ratings for local news are actually increasing in the mornings and early evenings.

Ratings increases seem hard to fathom given the headlines of today but that is exactly what

local news has witnessed. This increase in overall ratings and relative stability in late night

news ratings detailed in the chart below contrasts with declines across the rest of the TV

landscape, particularly in cable. While this chart was created by Sinclair Broadcast and covers

the entire broadcasting space, it is clear from the second chart, Media General’s local news

ratings are higher across all dayparts.

This second chart depicts the growth in both ratings and market share across all their stations

and across all dayparts from February 2014 to 2015.

TV ad spending is projected to increase from 2012 to 2018. TV ad spending will not grow

as fast as digital and TV ad spending will continue to lose market share to digital, but it is

projected to increase in absolute terms nonetheless.Valuing a company at free cash flow

yields beyond 20% would imply there will be dramatic degradation in the future business and

cash flow streams. That is just not the case when it comes to Media General. Their ad

revenues should remain stable (and as charted for the industry below, may even grow slightly

through time) and they will show reasonably significant growth in retrans fees and their digital

businesses creating top and bottom line growth for the foreseeable future.

Anecdotally, during recent earnings calls and conference presentations, executives have talked

about relatively flat core advertising figures (core being excluding political). Additionally, in more

recent weeks there has been talk about pacings moving slightly higher in the third and fourth

quarters.

So there is not dramatic growth in core advertising figures for the local broadcasters but there is

stability and more likely even modest growth over time. When you combine that with substantial

increases in political TV ad spending, retrans fees and digital revenues, the future of local

broadcasting businesses is not dire and is actually rather optimistic. This just does not jive with

20% free cash flow yields. We can receive much more value than we are paying at today’s

valuation.

I also want to point out largely unrecognized value in a local broadcaster. Their 24 hour

programming wheel contains substantial amounts of the most in demand live programming.

Live programming drives better real time viewing (as opposed to time delayed viewing) which is

highly sought after by advertisers. Thinking about their day, a local broadcaster has three large

chunks of local news, sports and weather (early morning, late afternoon into the evenings and

late night). They have live daytime programming with syndicated talk shows. They have live

big audience sports, live events and reality programming through the national networks in

addition to late night talk shows. The real challenge in the TV business, both network and

cable, has been time delayed primetime scripted shows. Scripted primetime advertising is a

small part of their revenue stream and this will continue to decrease in impact as retrans, digital

and political increase faster than core advertising.

Media General will continue to grow even in the face of continued challenges with declining

scripted primetime linear viewing.

Growth and Value Drivers

There are several growth drivers for Media General in the coming years and we will highlight

those with the most impact.

1. The Company will continue to improve its structural under compensation relative

to cable in pay TV affiliate fees. Pay TV fees are a stable, contracted and growing

revenue stream with very good visibility and they bring added sustainability, durability

and growth to the Company. As shown in one of our earlier charts, broadcast networks

deliver far larger audiences than cable but garner much smaller affiliate fees from pay

TV providers (more commonly known as retrans fees). Media General has a clear path

to continue improving its per subscriber fees which will lead to a 15% to 20% CAGR of

retrans revenue in the coming years.

Pay TV fees were 21% of total revenue in 2014 (pro forma for already completed

acquisitions) compared to 12% in 2012 and this percentage will continue to go higher in

the coming years.

2. Media General’s digital revenues will experience significant growth in the coming

years. It is often thought that digital offerings will be the undoing of the traditional media

companies. While not forgetting the durability of its core business, we must recognize

that Media General is a significant player in the digital arena. We as consumers seek

valued content whether on TV or online and it is the value of that content that ultimately

receives compensation,whether viewed on TV or on the Internet. Media General’s

traditional local news, sports and weather content remains in great demand online as

well as on TV. It is the value of their content that will lead the way. So long as we desire

to know what is happening where we live, Media General and other local providers will

remain in demand. And Media General’s ability to deliver in demand content across

multiple platforms is a differentiator going forward.

Media General had pro forma 2014 digital revenues of $164 million which is well above

the levels of broadcasting peers and was a full 21% higher than its own prior year digital

revenues. Looking forward, the Company expects digital revenue CAGR of 19%

through 2016 which, given the operating leverage in the business, is expected to

translate into an operating cash flow CAGR of 69% implying incremental EBITDA in

2016 of $30 million.

Because of increasing retrans fees and increasing digital revenues, ad revenue as a

percentage of total revenue continues to decrease and thus creates greater revenue

stability going forward. In 2012 (pro forma for all completed acquisitions), ad revenue

was 74% of total revenue. As digital revenue and pay TV fees have increased, total ad

revenue came down to 64% of total revenue in 2014. The more stable revenue streams

associated with retrans fees and digital will continue to gain in relative importance for the

Company and add to the sustainability, durability and growth trajectory of both revenue

and cash flows in the coming years.

3. Political ad spending will increase materially in the 2016 election cycle. Each new

election cycle brings more and more money to the table. The dollars already being

raised for the 2016 Presidential election are staggering and local TV stations are the

predominant recipient of election ad campaigns. A rising tide will lift all boats but Media

General is particularly well positioned givens its geographic footprint across likely

battleground states. Beyond 2016, there appears no end in sight for more money

coming into Presidential, Senatorial, Congressional, Gubernatorial and local elections.

The local broadcasters remain the best positioned to capture these dollars and bolster

their top and bottom line results.

4. Media General owns spectrum some of which can be considered surplus and can

be monetized through the upcoming spectrum auction. While the timing and

mechanics of the auction may change, the value creation opportunity for Media General

and other broadcasters in the upcoming FCC auction is material. Media General

expects it can conservatively garner after tax proceeds of $2 to $4 per share from the

auction without negatively impacting its ongoing cash flow. This is made possible largely

through channel sharing within high value spectrum markets and selling certain low

power stations. This is a significant amount of value creation relative to a $10 or $11

share price without having a material impact on future cash flows.

There are other ways to create value with this surplus spectrum beyond just the FCC

auction. As one example, Media General believes it has the capacity to add roughly 90

digital multicast streams across its footprint. It can leverage spectrum to enhance new

OTT offerings. Broadcast spectrum could be the means to deliver mass appeal video

and content to mobile devices as broadcast spectrum is 10x-100x less costly than

comparable network distribution.

Media General’s spectrum has significant value with means to extract that value in the

shorter term through the auction and through various business opportunities over the

longer term. Either way, the underlying value is significant relative to the Company’s

current market value and is additive to the 21% free cash flow yields already in place.

5. The various new OTT video platforms offer a new revenue source for Media

General. As was discussed earlier, the broadcast networks are must have content in

even the skinniest bundles or fullyfunctional OTT platforms.Using CBS All Access as

an example, Media General will get a share ofthe monthly fee paid to CBS for

subscribers in their footprint. Other potential OTT platforms such as those being created

by Apple, Sony and others are seeking local broadcast streams in addition to the

national streams. It ishard to quantify the impact of these newplatforms but the

message remains that Media General’s local content has value, is desired by consumers

and will receive compensation through both fees and advertising, regardless of the

viewing provider or platform.

Meredith Merger

On September 8

, Media General accounted it would merge with Meredith in a cash and stock

deal expected to close by June 2016. Strategically, the merger creates the number three owner

of major network affiliates in the country reaching 30% ofhouseholds and a large and profitable

digital business reaching more than 200 million monthly unique visitors. It also creates a

company reaching 100 million women with trusted brands making the combined company

number one in reaching the female audience.

Financially, the combined company will generate $1 billion in free cash flow over the first two

year period post-closing. This equates to an average of $2.50 free cash flow per share per year

in the two years following closing, a $0.30 increase in per share free cash flow relative to Media

General on a standalone basis. At a 10% free cash flow yield, this would bring roughly $3 per

share in incremental value.

While some may question bringing the Meredith publishing business into the fold, it should be

pointed out that this publishing business will be a small part of the combined business but it

does add a national presence with brands that span the country from a reach and impact

perspective. These magazine brands including Better Homes and Garden, Shape and Parents,

amongst others, bring valued content targeting female audiences that can be leveraged across

the broadened portfolio.

Meredith has licensed its brands to companies such as Wal-Mart (which sells branded Better

Homes and Gardens products) and other consumer businesses. Brand licensing is a high

margin business that is highly accretive to earnings and net income margin. Meredith has plans

to expand the high margin licensing business across brands such as Shape, Parents and

Allrecipes.

It is most important however to not lose sight of the underlying rationale for the merger: the

combined company will carry much greater heft and scale to the TV business becoming the

third largest major network affiliate owner in the country while also creating a digital business

with 200 million monthly unique visitors.

And this all leads to a significant increase in free cash flow per share with a more robust

platform from which to grow going forward.

**** (addition to summary after Nexstar offer made public) **** It is clear the Nexstar merger is a better strategic fit for Media General. That, in and of itself, is not enough however. Nexstar must also pay a fair and reasonable price for Media General and $14.50 is not a reasonable price. We should be careful not to embrace just any deal that arises in order to oppose the Meredith deal. Each proposed deal should stand on its own merits. My hope is that the Media General Board engages with Nexstar and works towards a deal that brings fair value for MEG (but only for a fair value for MEG) knowing the value that resides in the Company. If they cannot garner a more reasonable price, they should be prepared to continue as a strong standalone business, pay down debt and buy back shares. *****

Media General Risks

When making any investment, it is a must to study the Company’s filings including its listed Risk

Factors and an investment in Media General is no different. With that as a necessary backdrop,

I want to point out two factors I am monitoring more closely.

First, Media General carries a reasonably larger debt burden. The cost of this burden is low

today given extraordinarily low rates and the relative ease of refinancing as and when needed.

The stability and strength of their multiple revenue streams, its strong cash flow, and content

that is valued highly by both consumers and advertisers brings a level of stability and durability

to their business which also mitigates the risk of a larger debt profile. But markets do not stay

sanguine indefinitely and a change in the rate structure and or the risk appetite of lenders would

bring external challenges to the Company’s door.

To mitigate such risk, Media General has plans to deleverage through time as a part of their

overall capital allocation plans. Using the second quarter of 2015 as an example, the Company

both paid down debt of $135 million and bought back shares for roughly $19 million. The cash

generating abilities of the Company will enable continued debt pay down thereby reducing its

risk profile. (I also hope they continue to buy back shares if they remain at such an attractive

valuation).

There is substantial change occurring in the media landscape and with change comes

uncertainty, making an assessment of future business prospects more challenging than it

otherwise would have been. One aspect of change that gets discussed less often is potential

changes in how the networks and the affiliates work together. The networks and affiliates have

largely had symbiotic relationships through time as they have each brought significant value to

the table. The networks bring big national sports, live national events and programming while

the local stations bring the local reach, touch and impact not possible from a national seat.

The importance of local news, weather and sports as witnessed by their strength in viewership

should continue to augur well for the affiliates as the network relationships evolve but this

remains a source of change and requires monitoring. For now, the local stations stand to

receive compensation in each of the OTT, online or newer video platforms being rolled out to

the market. As just one example, Media General’s CEO Vince Sandusky reiterated at a recent

conference that they are participating and will get paid as a part of the national rollout of CBS All

Access (CBS’ fully online video offering).

As with all investments, it comes back to valuation and the question of whether the valuation is

sufficiently attractive given all the dynamics at play. In the case of Media General, a free cash

flow yield in excess of20% with additional sources of value likely to bearfruit brings a uniquely

compelling opportunity for those willing to look past the noise of today.

Alternative Paths to Valuation

Media General is not currently a significant taxpayer due to a decent sized NOL. They do pay

some small amount of cash taxes but not what they would absent the NOL. So the free cash

flow estimates discussed throughout this report do deduct those lesser tax amounts but do not

deduct a full tax load.

The NOL was about $635 million when it was discussed at the Media General Investor Day this

past year, which equates to about $5 per share. With that amount of NOL, they will not be

material taxpayers in 2015 and 2016 and are not likely to be material taxpayers in 2017 and

maybe even not in 2018 as well (excluding the impact of the Meredith merger which would likely

accelerate NOL consumption given the incremental Meredith profitability). Making some

assumptions about the earnings profile through 2018, we can estimate a PV of the NOL around

$4 per share.

If we fully tax effect the 2015 and 2016 free cash flow per share you would arrive at an average

per share per year fully taxed free cash flow around $1.80. Applying a 10% free cash flow yield

would bring $18 in value and then adding an estimated $4 PV value of the NOL would bring us

back to the same $22 neighborhood I discussed originally. I would also reiterate this does not

include spectrum auction net proceeds of potentially $2 to $4 per share nor does it give credit

for the per share cash flow accretion from the Meredith merger.

We can also consider the Company’s EV/EBITDA valuation. Thinking about 2015 and 2016,

Media General (before the Meredith merger) is likely to post average annual EBITDA over the

two years of $465 million. I believe a 10x EBITDA multiple is appropriate given a local

broadcaster is a durable and sustainable business with the must have nature of their local and

national network programming. I believe a 10x multiple is also appropriate for a low capital

intensity (asset light) business that is growing. Applying a 10x multiple and deducting their net

debt of $2.22 billion leaves an equity value of roughly $2.43 billion, or about $18.70 per share.

We would then need to add the PV ofthe NOL which again brings us backto that $22+

neighborhood before considering the net proceeds from the spectrum auction and the value

creation from the Meredith merger.

While I arrived back where we began I do want to point out my focus is first and foremost on

free cash flow generation and how to value that free cash flow.

Conclusion

Even before accounting for the positive free cash flow impacts of the Meredith merger, Media

General will generate over 2015 and 2016 average free cash flow per share per year of $2.20.

That equates to a 21% free cash flow yield at today’s share prices, an astoundingly attractive

proposition. Bringing the free cash flow yield to a still very reasonable 10% would bring a more

than doubling in share price. There remains yet further sources of value creation including a

potential $2 to $4 per share in value from the upcoming FCC spectrum auction and $0.30 of

incremental per year free cash flow from the Meredith merger which, at a reasonably

conservative 10% free cash flow yield, would create an additional $3 in value. So against a $10

to $11 share price, we have a 20+% free cash flow yield with additional sources of value

creation equaling $5 to $7 per share, 50% to 70% of today’s share price.

Pulling it all together brings a today target price of $22 with an incremental $5 to $7 of potential

value creation in the next year or so.

Media General has a solid and enduring business that generates tremendous levels of

free cash flow and is available today at a wildly attractive valuation.

Slides used in the above presentation came from Media General and Sinclair Broadcast company presentations.

Disclaimer: The opinions in this document are for informational and educational

purposes only and should not be construed as a recommendation to buy or sell the stocks

mentioned or to solicit transactions or clients. Past performance of the companies discussed

may not continue and the companies may not achieve the earnings growth as predicted. The

information in this document is believed to be accurate, but under no circumstances should a

person act upon the information contained within. We do not recommend that anyone act

upon any investment information without first consulting an investment adviser as to the

suitability of such investments for his specific situation. A comprehensive due diligence

effort is recommended.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

I don't often focus on catalysts but I hope the announcement of the Nexstar offer serves to highlight the underlying value of Media General. I would also point out that Nexstar itself appears compelling on their own after doing preliminary research and would be even more so if they can acquire Media General. In fact, if they somehow are able to pay only $14.50 for Media General (I don, they would warrant a very hard look as the combined entity would create 2015/2016 average annual per share free cash flow over $10.50. At a NXST price below $50, that is also a very high FCF yield similar to where MEG was before the NXST annoucement.

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			2015	2016
Price:	13.93	EPS	0	0
Shares Out. (in M):	130	P/E	0	0
Market Cap (in $M):	1,810	P/FCF	0	0
Net Debt (in $M):	2,220	EBIT	0	0
TEV (in $M):	4,030	TEV/EBIT	0	0