Nexstar/Media General Seen Likely To Be Approved
Nexstar’s proposed $4.6 billion buy of Media General is seen as likely to get FCC approval, though some details of the transaction remain unclear, communications attorneys and analysts told us. Though Nexstar has indicated it plans to divest stations in overlapping markets or sell their spectrum to get regulatory approval, CEO Perry Sook said on an investor call the specifics were still in motion. Along with specific divestitures, there are questions about how long the transaction (see 1601270040) will take to be approved, with the incentive auction just around the corner. Broadcasters are under pressure to expand to match with their growing and numerous competitors, making this deal “not surprising,” said BIA/Kelsey Chief Economist Mark Fratrik.
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Several communications attorneys told us they thought it likely the deal would get FCC approval, though they said the lack of specifics about the fate of overlapping markets makes it hard to know what shape the agreement would take. Since Media General and Nexstar have both had deals approved at the FCC recently, they're seen as being able to work with the agency to get the transaction done, attorneys told us. “Both companies have pretty good legal counsel,” Fratrik said. Cox Communications, in a retransmission consent dispute with Nexstar, is opposing the deal (see 1601280070). Nexstar didn't comment.
Nexstar doesn’t plan to ask for waivers to hold onto stations in overlapping markets but will offload them though sales or the incentive auction, Sook said. Nexstar doesn’t want “small deals” to hold up the larger transaction, Sook said. Some of those divestitures may go to Meredith under the agreement that led to Meredith's relinquishing its proposed deal with Media General to make room for the Nexstar buy, according to Sook and a Nexstar release. “Meredith will receive an opportunity to negotiate for the purchase of certain broadcast and digital assets currently owned by Media General,” the release said. Sook said on the call the specifics of the divestitures and Meredith’s involvement are still being worked out.
Nexstar and Media General officials on the investor call also said that both companies would be entering stations into the incentive auction and selling their spectrum. Though the deal will bring the new Nexstar Media Group right up against the 39 percent broadcast ownership cap, Sook suggested stations sold through the incentive auction could bring the company enough under the cap that it could contemplate future deals.
Though the transaction is the first large broadcast deal since Congress took action against FCC attribution rules on joint sales agreements, it’s unlikely to benefit from any relaxation of the Media Bureau’s stance on such agreements in transactions, said Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman. Congress could have invalidated FCC increased attribution rules for JSAs but didn’t do so, Schwartzman said. “What Congress did was very targeted to provide relief for existing players.” Schwartzman opposed giving companies more time to unwind existing JSAs.
For the moment, it seems Nexstar/Media General will likely wait until after the auction for the deal to be finalized, broadcast attorneys told us. The commission said in its incentive auction rules that deals that weren’t filed by the December short-form application deadline would have to wait until after the auction to be approved. FCC Chairman Tom Wheeler said similar last week. Nexstar/Media General’s paperwork hasn't been received by the commission, a bureau spokeswoman told us. Though Sook said the companies may try to seek a waiver of the commission policy, the FCC “hasn’t indicated a willingness to do that.” Several broadcast attorneys told us they thought it unlikely such a waiver would be granted.