The long-awaited approval of a privatization effort that would bring TEGNA ownership under the control of Standard General, with a large minority non-voting stake in the television station owner held by Cox Media Group’s majority owner, Apollo Global Management, has not come.
Instead, the FCC has issued a Hearing Designation Order — an ominous sign for Soo Kim, who heads Standard General, and the woman who has been planning to assume the role of TEGNA CEO from Dave Lougee, Deb McDermott.
The FCC made the announcement just after 4pm Eastern on Friday, noting that the Media Bureau has “designated certain questions related to the pending applications” involving Standard General, TEGNA and Cox Media Group to its Administrative Law Judge.
The pending applications involve a series of transactions that would result in Standard General’s acquisition of 64 full-power TV stations and two full-power radio stations currently owned and operated by TEGNA. The deal has been mired in controversy, with vociferous opposition and support emerging over the last several months while the FCC waited on giving its blessing.
Originally, closing was anticipated to occur at the end of 2022.
Now, with the HDO, the deal could end up getting scuttled. This was the case when Sinclair Broadcast Group’s proposed acquisition of Tribune Broadcasting came under extreme scrutiny from the Pai Commission. The result: Sinclair unwound the transaction, opening the door for Nexstar Media Group to acquire Tribune.
It was on September 21, 2021 that RBR+TVBR first reported the confirmation of a joint bid for TEGNA, owner of such television stations as WUSA9 in Washington, D.C., and WTSP-10 in Tampa, from Standard General and Cox Media Group’s controlling interest holder, Apollo Global Management. On April 21, 2022, the FCC accepted for filing transfer of control applications. These are what still await regulatory approval from the Commission and are a focal point of the Hearing Designation Order. According to the Commission, the HDO focuses “specifically on material concerns in the record related to how the proposed transaction could artificially raise prices for consumers and result in job losses.”
In prepared comments, FCC Chairwoman Jessica Rosenworcel commented, “As part of the FCC’s mission, we are responsible for determining whether grant of the applications constituting this transaction serves the public interest. That’s why we’re asking for closer review to ensure that this transaction does not anti-competitively raise prices or put jobs in local newsrooms at risk.”
Rosenworcel added that the the additional review “will allow us to make a more informed assessment on whether proposed safeguards are sufficient to protect the public interest, and we will take the time needed to address these critical questions.”
Thus, the HDO is by no means a death knell for Standard General. However, given recent precedent and the cost of delaying the transaction, Soo Kim will be left with some difficult decisions in the coming days as to how much longer he can push the closing date.
As Rosenworcel explained, Section 310(d) of the Communications Act of 1934 requires that the Commission make an affirmative determination that grant of an application for assignment or transfer of control serves the public interest. In doing so, the Commission must consider whether a proposed transaction could result in public interest harms by substantially frustrating or impairing the objectives or implementation of the Act or related statutes. “Where the record before the Commission regarding any transfer application presents substantial and material questions of fact, the statute requires the Commission to designate those issues for an evidentiary hearing,” the FCC explained.
That’s what the HDO seeks to accomplish. That said, those against the deal include polarizing House of Representatives Member Nancy Pelosi (D-Calif.), Speaker of the House through the last Congressional session.
Even with a 2-2 deadlock between Republicans and Democrats at the FCC, and Gigi Sohn‘s quest to be confirmed as the fifth Commissioner far from over, the fate of TEGNA could come down to Administrative Law Judge Jane Hinckley Halprin.
And, based on other HDOs Halprin has overseen of late, including that of WQZS-FM in Meyersdale, Pa. owner Roger Wahl, the process could take more than a year.
Investors have already reacted to the FCC’s HDO announcement by selling off TEGNA shares even as the stock goes ex-dividend on March 9, with a quarterly reward of $0.095 per share not enough to keep investors from holding on to the shares.
In immediate after-hours trading on Friday, as of 4:58pm Eastern, TEGNA had plunged 25% in value to $16.40, from $21.84. That puts TGNA shares back to where they were at the start of 2021.
This is a developing news story. RBR+TVBR will offer additional coverage as it arises, from February 27.
