An auction of the Tegna TV-station empire has been thrown into doubt as the company has questioned whether a prospective sale to a leading bidder would face antitrust concerns from US regulators, The Post has learned.
The broadcasting giant — spun off from newspaper chain Gannett in 2015 as a separate, publicly traded company that now operates 64 TV stations and two radio stations across 54 US markets — announced Sept. 21 it had received buyout proposals and that it planned to review them.
Nevertheless, more than a week later Tegna has not begun negotiations with a key bidding bloc that consists of hedge fund Standard General and buyout firm Apollo Global Management, two sources close to the situation said. That’s despite Standard General and Apollo expressing a willingness to increase their $22-a-share fully-financed offer, which currently values the company at upwards of $4.8 billion, sources said.
Instead, sources said Tegna is asking Standard General and Apollo questions around whether their bid can withstand antitrust scrutiny from the Federal Communications Commission.
“I think there is a 50 to 75 percent chance a deal happens,” a somewhat skeptical source close to the situation said.
The possible stumbling block has emerged amid a rocky history between Tegna and Standard General — headed by Soo Kim, the savvy hedge-fund mogul who recently has been assembling a US casino empire under the Bally’s moniker. Earlier this year, Standard General launched an unsuccessful proxy contest to oust Chief Executive David Lougee.
Kim — whose firm had pointed to allegations of discrimination and racial bias against Tegna in a series of lawsuits — has no intention of keeping Lougee if he buys the company, sources said. Standard General, not Apollo, would be the controlling owner of the new Tegna, sources said.
Tegna over the last month has invited Standard General and Apollo, as well as the comedian-turned-media-mogul Byron Allen who is teaming up for a bid with buyout firm Ares Management, into its data room to review its confidential financial information. In exchange, Tegna got Standard General to sign an agreement it would not engage in another proxy contest for more than a year, sources said.
As for the antitrust concerns, the FCC’s national media ownership rule prohibits any entity from owning commercial television stations that reach more than 39 percent of US television households nationwide, with a discount given to stations operating on UHF channel 14 and above.
The proposed buyout, when combining Tegna’s stations with those that Standard General and Apollo already own, would exceed that number. The suitors, however, claim they are not planning to roll most of their existing stations into the post-Tegna company, sources said.
Apollo is only contributing one of the 33 television stations from its Cox Media Group, a source said. Cox Media Group overall says it reaches 52 million households. Standard General only owns three stations, which would become part of the new Tegna, according to the source. There is no geographic overlap with the four television stations that would be combined with Tegna, sources said.
Still, Apollo’s Cox owns the ABC affiliate in Atlanta and Tegna an NBC affiliate in Atlanta so the FCC would need to get comfortable with a Standard General-owned Tegna in which Apollo owns a stake being truly separate from Cox, a source said.
Standard General and Apollo sparked the current sale process around June when Gray Television signed a deal to acquire Meredith Corp.’s television stations, taking their main bidding rival out of the picture.
Presently, Standard General is developing a big presence in the sports gaming space through its ownership of the Bally Sports brand. Bally has the naming rights for about half the country’s regional sports networks.
If FCC-related concerns derail talks, it would be the third time in recent years Tegna started a sales process only to cut it short. In 2019, Tegna confirmed it rejected a takeover offer from Apollo. In early 2020, Tegna started a sales process getting bids from Gray Television and Apollo at reportedly $20 a share. Tegna cancelled that process when the COVID pandemic started and debt markets became choppy.
Meanwhile, Byron Allen and his bidding partner Ares Management have not come up with all the money to fund their $23-a-share bid, sources said. Allen is finding it difficult to raise the preferred equity he needs, and is believed to be more than $1 billion short, sources said. Part of the difficulty is Allen Media owes debt equal to about seven times its earnings giving the Weather Channel owner little equity value, sources said.
Allen in recent weeks has reduced its debt levels with new programming contracts, and Tegna is studying its complicated offer, which is in better shape than it might have appeared a few weeks ago, a source said.
Morgan Stanley is Byron Allen’s lender and is expected to refinance all of Allen Media if they succeed in buying Tegna, the source added.
Tegna’s shares closed Wednesday at $21.01, up from $17.52 earlier this month when news of the new auction was first reported.
