The D.C. Circuit Court of Appeals on Monday rejected an initial appeal by Standard General that sought to reverse a hearing designation order and force the FCC to speed up its review of the hedge fund’s pending acquisition of broadcaster Tegna in a proposed $8.6 billion deal.
Standard General is seeking to acquire broadcaster Tegna under a multi-billion deal that was announced in February 2022, with a regulatory review process that has been ongoing for more than a year. Tegna owns 64 TV stations in 51 U.S. markets and the proposed acquisition would take the company private. In late March Standard General filed petitions in the DC Court of Appeals against an FCC Media Bureau designation hearing order and sought an expedited timetable, with the court last week ordering an accelerated briefing schedule.
On Monday the court granted the FCC’s motion to dismiss the appeal, finding that, “An appeal ‘filed after a bureau decision but before resolution by the full Commission is subject to dismissal as incurably premature.” Essentially it rejected one of Standard General’s appeals made on the grounds that the hearing designation order, issued in late February, was effectively a final decision on the deal by the FCC, asking the court to treat it as such and reverse the order. In granting the motion for dismissal, the court found there was not yet a final FCC action for Standard General to appeal.
The FCC Media Bureau’s move for a hearing designation order sends the case to an Administrative Law Judge (ALJ) to review concerns, which is a lengthy process that’s often seen as a deal killer and Standard General has said would make it unable to complete the deal by its May 22, 2023 financing deadline. However, the FCC motioned for dismissal, arguing that an appeal was premature as the commission has not held a formal or final vote on the deal. The court agreed, based on the order, deciding the appeal of the hearing designation order wasn’t appropriate because there was not yet a final action by the commission one way or the other on the Tegna deal. That said, the court didn’t close the door completely just yet, as it decided to expedite consideration of Standard General’s mandamus appeal.
While the court granted the FCC’s motion to dismiss the initial appeal, it further ordered that it will consider a conditional writ of mandamus petition on an expedited basis – which Standard General filed separately and simultaneously – with the FCC directed to file a response by April 11. Standard’s reply is due by April 14. That motion had asked, to the extent the court decided the Commission’s order didn’t yet constitute a final action on the applications, that it find the FCC action unlawful and direct the commission to grant licenses before May 22.
According to Law360 “if the court granted the writ of mandamus, the FCC would be forced to decide whether to transfer Tegna’s broadcast licenses to Standard General.”
Fierce reached out to the FCC and Standard General, which both declined to comment on the court actions.
The regulatory review of the Tegna deal has been lengthy and at times appeared headed towards a green light, including with the DOJ earlier this year allowing a deadline to pass without posing any challenge to the deal. However, the designation hearing order by the FCC signaled the road to approval may be blocked. The main issues to be taken up by an ALJ related to the potential for increased retransmission consent fees and cuts to newsroom headcounts, though SG previously made commitments to keep current fees and staffing levels in place, and also offered a 20% increase to local news budgets. Standard General has also suggested that those issues related to contracts and employee counts that were the basis of the HDO aren’t within the FCC’s legal purview for regulatory consideration.
In the appeals case, New Street Research analyst Blair Levin noted that the National Association of Broadcasters (NAB) also weighed in, arguing on the side of Standard General that the review illegally enables the FCC to regulate private contracts and staffing considerations, with NAB stating “The Media Bureau’s Actions Create Untenable Unpredictability in Mergers and Acquisitions.”
New Street said that without offering its own position on the legality of the FCC action, the analyst firm agrees with NAB’s second point. The firm also expected a court decision as early as this week.
“Our bottom line continues to be that the companies face difficult odds in achieving a result that allow them to close by the May 22nd financing termination date,” wrote Levin.
After the appeal was initially filed, analysts at New Street Research maintained their view that “the prospects for SG prevailing are low.”
Levin in a March note to investors said that the relief Standard General was seeking, including effectively rejecting the FCC’s ability to send the license transfer review to an ALJ, “also upends traditional practice.”