Standard General $8.6 Billion Purchase of Tegna Could Face Scrutiny Over Apollo Role
A financing arrangement between Standard General and Cox Media Group-owner Apollo Global Capital could lead to FCC scrutiny of Standard’s proposed $8.6 billion purchase of Tegna, said media brokers and industry analysts Tuesday. The deal would leave Apollo with a nonvoting interest in Standard. If regulators view Apollo’s interest as attributable, they could treat the transaction as a combination of Cox’s, Standard’s and Tegna’s stations, which would likely violate FCC ownership rules. “It’s not clear how that’s going to be accounted for at the FCC and the DOJ,” said S&P Kagan analyst Justin Nielson.
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It isn’t common for broadcasters to own stock in other broadcasters, said BakerHostetler broadcast attorney Dan Kirkpatrick. If the shares are nonvoting and don’t give Apollo any control over the new entity, regulators are likely to approve the deal, he said. FCC and antitrust regulators are likely to pay special attention to the specifics of Apollo’s nonvoting shares, Kirkpatrick said. Some nonvoting shares allow owners limited veto abilities over transactions and other possible company moves, he said.
Unlike the most recent transactions by Gray Television or E.W. Scripps’ acquisition of Ion, this transaction wouldn’t create a substantially larger broadcaster, Nielson said. Standard has a handful of smaller market stations, while Tegna has 64 TV stations. “This is really just a change in ownership,” said media broker Gregory Guy of Patrick Communications.
Apollo is “strictly a financing partner” in the deal, said Standard investor Amit Thakrar in an interview. Under the terms, Tegna would be acquired by Standard -- the broadcaster’s largest shareholder -- and five Tegna stations in Austin, Houston and Dallas would be divested to Apollo’s Cox Media Group, said a Tegna release. After the closing, Cox Media Group and “funds managed by affiliates of Apollo Global Management,” would hold securities in the new entity “that will be non-voting and non-attributable,” said releases from Tegna and Cox. The deal doesn’t involve overlaps or top-four combinations, and wouldn’t approach the 39% national ownership cap even without the UHF discount, a Standard spokesperson said.
Standard General founder Soo Kim would become the new company’s board chairman. Standard CEO Deb McDermott would become the CEO, replacing current Tegna CEO Dave Lougee, who was targeted by Standard in a proxy fight last year that included allegations of racial discrimination (see 2105060069). McDermott “is an experienced and accomplished broadcast executive, and we are confident in TEGNA’s future under her leadership,” said Lougee in Tegna’s release. After the deal is complete, Tegna would also become a private company, the Tegna release said.
Since Apollo’s shares won’t be attributable, Standard expects the acquisition to be palatable to regulators, said Thakrar. With a minority owner and a female CEO, the transaction also aligns with the FCC’s ownership diversity goals, Thakrar said. The FCC under Chairwoman Jessica Rosenworcel is considered potentially fraught for broadcasters seeking novel transactions, but Thakrar said Standard expects the agency to look on the deal “favorably.” Standard has been believed to be pursuing ownership of Tegna for a while, Guy said.
The deal likely isn’t a sign that more M&A is on the way, Kirkpatrick said. “I don’t see this as a sign or anything,” he said. After this transaction, there won’t be many targets for broadcasters looking to amass scale, industry officials told us. Tegna said the transaction is expected to close "in the second half of 2022."