Tegna and Standard General are inching closer to obtaining regulatory approval for their merger, with an interagency committee last week giving the companies’ deal a thumbs-up.
In a letter dated November 17 to Tom Sullivan, chief of the Federal Communications Commission’s international bureau, the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector – informally known as “Team Telecom” – said it has “no objection” if the FCC were to approve the merger.
At the same time, the committee noted it has “no recommendation at this time” for the FCC to approve the deal and that it reserves the right to review its decision if any national security or law enforcement risks arise.
Standard General in February announced its plans to acquire broadcaster Tegna for $8.6 billion. The transaction, which received approval from Tegna shareholders in May, awaits final review from the FCC and the U.S. Department of Justice (DoJ). The companies expect to close the deal by year-end.
The agencies are reviewing Standard General’s foreign ownership as the private equity firm is incorporated in the Cayman Islands. Jon Schleuss, president of the NewsGuild-CWA labor union, expressed concern last month that Standard General is “backed by anonymous investors located in the Cayman Islands and elsewhere in the world.”
Competition is another factor affecting the deal’s approval. Over the summer the FCC requested information on how Standard General would negotiate retransmission agreements with cable providers and if the firm plans to cut jobs at Tegna.
NewsGuild and the CWA’s National Association of Broadcast Employees and Technicians have urged the FCC to reject the merger, with the unions believing a Standard General-controlled Tegna would negatively affect the journalism job market.
The unions also questioned how much influence Apollo Global Management (which is financing part of the deal) will have once Tegna becomes privately held.
Speaking with Fierce Video in August, Standard Media CEO Deborah McDermott – who will step into the CEO role at Tegna once the deal closes – said she has no intention of making any job cuts. As for retransmission consent fees, McDermott only said that the company would fulfill whatever contracts it has.
As part of the deal, Standard General plans to sell off three Tegna stations to Cox Media Group, in accordance with the FCC’s media ownership rules, which bar single companies from owning broadcast television stations that reach more than 39% of U.S. households.
Analysts at New Street Research expressed optimism that the merger will be approved in the coming weeks, but some hurdles remain.
“We understand the DOJ is continuing its investigation,” wrote New Street’s Blair Levin in a Sunday note. “To the extent that it wishes to limit cooperation between private equity firms investing in the same sector, there are a variety of conditions that could be imposed to address the concerns.”
Levin added that while the unions recently issued another filing to the FCC concerning the deal, “the repetition and summary argument about what we think is the most important issue — jobs — is another data point suggesting we are moving toward the final act.”