Standard General’s takeover of Tegna is headed to judicial review — and a long delay
It must be particularly galling to Standard General that Tegna posted an 18% year-over-year growth in earnings for the fourth quarter of 2022. Standard General hoped to have taken over Tegna by now. That would have meant the private equity company could have bagged the $179 million in midterm election spending that Tegna stations raked in.
Now, the Federal Communications Commission Media Bureau is sending the $8.6 billion takeover of 64 TV stations to be reviewed by an administrative law judge. It all but guarantees that a takeover will be a long way away, if it happens at all, since the deal had a “final extension date” of May 22, 2023. Such a review from an administrative law judge is similar to a trial, with witnesses and evidence.
The FCC announced:
The Federal Communications Commission (Friday) announced 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 Hearing Designation Order 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.
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,” said Chairwoman Rosenworcel. “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.”
The Media Bureau heard concerns from The News Guild-CWA and the National Association of Broadcast Employees on June 22, 2022. The unions said the sale to Standard General would result in higher retransmission fees, which are the fees that cable companies pay for the right to carry and pass along a signal.
Retransmission fees, which are essentially passed straight through to cable customers, have increased by 42% over a period of five years, according to the FCC. Such retransmission consent fees have been estimated to account for approximately 40% of broadcast station revenue
The FCC’s Media Bureau says it is also concerned that Standard General would lay off workers at stations, even though Standard General has said it has no plans to do so.
A year ago, Standard General offered $24 a share for Tegna stock. The price dropped to $17.50 on Monday, down nearly 20% on the news that the case was heading for judicial review.
Broadcasting and Cable included these passages from Standard General:
“A decision delayed is a decision denied,” said Soo Kim, managing partner of Standard General. “Our proposed transaction is consistent with all FCC regulations and precedent. It is bolstered by a voluntary commitment to invest in local news, preserve newsroom jobs, and address purported concerns related to consumer pricing. But rather than rule on the transaction’s merits, as the law requires, the Media Bureau is attempting to scuttle the deal by ordering a wholly unnecessary hearing process, that if left standing by the Commission, would kill the deal.”
“The unavoidable implication is that this particular transaction may be scuttled not due to substantive or evidence-based concerns, but rather by the Media Bureau’s unexplained view that Standard General simply should not be allowed to own these television stations and that any future applicant to acquire Tegna or any other TV station group must meet the test of being acceptable to the Media Bureau in its sole, absolute, and unreviewable discretion,” Kim said. “This precedent, if allowed to stand unchallenged, will turn the ‘Public Interest’ standard on its head by restricting investment in and ownership of wide swaths of the economy to those deemed acceptable by regulators.”
One of the other factors keeping this takeover unresolved is that the FCC currently has only four commissioners. Two are Democrats and two are Republicans. A potential fifth commissioner’s appointment is tied up in the U.S. Senate as Republicans call Democrat Gigi Sohn an “extreme partisan.”
Clarification: This article was updated to specify that the FCC Media Bureau, not the full FCC, is sending the transaction to an administrative law judge.
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