Standard General looks to be inching closer to completing its proposed acquisition of TV station owner Tegna, saying it only needs FCC approval after the U.S. Department of Justice did not challenge the deal following review.
Reuters reported that the DoJ did not mount any challenges, noting Standard now anticipates the deal with Tegna, initially valued at $8.6 billion, to close in March or April, subject to FCC approval.
In a note to investors, New Street Research analyst Blair Levin pointed to three happenings this week as suggesting positive momentum for the transaction, which the firm now anticipates is more likely to close in May or April, rather than next month. For timing, New Street noted it would be at least several weeks for a proposed order to be sent (after anticipated meetings), then typically at least three weeks for FCC commissioners to consider it and write their own statements ahead of a vote.
The DoJ not bringing any action to block the deal was one development this week, with Levin noting it allowed the waiting period (or deadline to bring action under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976) to pass in a move that wasn’t unexpected.
Still, Levin said there was some uncertainty as to if that would happen “given DOJ concerns about private equity transactions involving multiple firms in the same sector.” The analyst went on to say that the DoJ could still advise the FCC on how to address those concerns.
The other two developments include terms of the agreement, which on February 21, 2023 extended the deal to May 22, 2023; as well as Teton Merger Corp. commencing tender offers and consent solicitations for senior notes of Tegna.
“We understand this to be a technical step to ensure a seamless close and to clean up the capital structure as much as possible in anticipation of closing the transaction by the new Outside Date [May 22],” wrote Levin, regarding the senior notes.
And while these three steps signal deal traction, New Street believes the final step of FCC approval “remains the most challenging” with FCC Chairwoman Jessica Rosenworcel “holding all the relevant cards, as she had from the beginning of the review.”
Roughly a month ago, the FCC concluded its third comment period for the Standard General-Tegna deal, after which Standard General’s Soo Kim told reporters that dialogue with the agency was ongoing.
“We’re optimistic that we’re closer to the end and not the beginning,” he said in January. “We have a conversation going on, and the conversation is relevant because we’re all aligned to try to get to the final result.”
As Standard looks for the FCC greenlight, New Street expects material meetings to begin this week or next, with the first likely to involve Standard General and FCC staff or commissioners, as well as meetings involving the commission and deal opponents.
For the meeting between staff and Standard General Levin said the FCC will hint at what the chair believes is insufficient in earlier offers from Standard General related to jobs, prices and information sharing.
“If, after that meeting, SG files an extensive ex parte with revised commitments, it is a likely indication that the staff and the Chair, and SG are largely in agreement,” wrote Levin.
In pointing to Rosenworcel holding all the cards, the firm noted that if she wants to kill the deal she can by never bringing it up for a vote, or could garner at least three votes either way to approve with minimal or no conditions, or with conditions more aligned with what deal opponents want – with New Street believing the latter is the most likely outcome.
Levin also doesn’t think that a decision on the deal or timing will depend on Senate action related to Gogi Sohn’s nomination to the FCC, as waiting on an outcome would be counter to Rosenworcel’s “many public statements about how many important votes the Commission has taken with its current configuration” of four commissioners.
Related to the deal, Standard General has pledged not to cut journalism jobs for at least two years or raise retransmission consent rates for MVPD partners. Some that filed comments in response to Standard General’s commitments include NCTA, NewsGuild, Common Cause, and American Television Alliance.
Dish has also advocated for conditions to the deal, in part arguing that provisions in existing retransmissions consent agreements with MVPDs could be exploited by Standard General and Cox (the latter which is poised to get certain stations as part of the deal closing) that “would allow them to immediately receive higher fees upon consummation of the transaction, propose other harmful non-price terms, and or artificially create coterminous expiration dates that increase the pressure on MVPDs.”