Fate of JSAs in Nexstar/Media General Unclear
Media General and Nexstar announced agreements to divest 12 stations, to secure FCC Media Bureau approval for their combination. Bigger questions loom about the deal's joint sales agreements, according to FCC filings and attorneys familiar with the deal. The FCC stance on JSA's is up in the air because of 3rd U.S. Circuit Court of Appeals Prometheus III decision (see 1605250016) remanding the rules barring JSAs in some circumstances and the upcoming quadrennial review rulemaking which the 3rd Circuit wants the agency to finish soon. Even before the ruling, Nexstar and Media General argued in FCC filings that the JSAs involved in that acquisition should be allowed to continue, despite recent bureau policy. “To the extent that the Commission may have unofficially taken a contrary position, that position is inconsistent with the statutory language, conflicts with the Commission’s own precedent and practices, and even if correct, would still mandate grandfathering the Legacy JSAs here,” said Nexstar and Media General in opposition comments filed in response to petitions to deny the first company's buy of the second.
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Nexstar/Media General announced an agreement Monday to divest five stations in five markets to USA Television MidAmerica Holdings, an affiliate of MSouth Equity Partners and Heartland Media, for $115 million. Nexstar and Media General said in FCC filings that they planned to divest “a dozen” stations to comply with FCC rules, and this is expected to be the last of the divestitures associated with the acquisition, Wells Fargo analyst Marci Ryvicker emailed investors. Monday's deal involved WFFT-TV Fort Wayne, Indiana, KIMT Mason City, Iowa, WTHI-TV Terre Haute, Indiana, WLFI-TV Lafayette, Indiana, and KQTV Saint Joseph, Missouri. Nexstar/Media General won't be ruled on until after the incentive auction is complete because the acquisition wasn't filed with the FCC ahead of a Jan. 12 deadline for deals to be filed before the auction. Nexstar previously had suggested it could pursue a waiver to have the acquisition approved before the incentive auction is complete.
Nexstar is unlikely to pressure the FCC on the matter unless the auction lasted an especially long time, said a company spokeswoman. Though the deal won't be ruled on until the auction is complete, it can still be reviewed while the auction goes on, attorneys told us. The bureau in a letter last week asked the parties to the transaction for more information on the acquisition. The FCC didn't comment, but the commission's transaction website said Monday the deal was 117 days into the standard 180-day transaction review timeline.
Since the 3rd Circuit did away with the JSA attribution rules, it's not clear what the FCC's stance on such arrangements will be by the time the Nexstar/Media General is decided. Several broadcast attorneys and analysts told us they expect FCC Chairman Tom Wheeler to seek to reinstate the rule as part of the quadrennial review proceeding. Even before the 3rd Circuit decision, the bureau said a congressional change to the JSA rule's grandfathering provisions had no effect on the bureau's stance against transactions involving JSAs. The bureau denied a request earlier this year from Gray Television that existing JSAs in a transaction should be subject to the extended grandfathering provision (see 1603100058). Several attorneys told us they think if the FCC had to rule on Nexstar/Media General today, it still would hold to its stance on JSAs in transactions, despite the lack of an underlying JSA attribution rule.
Nexstar's filing from before Prometheus III suggest it planned to fight to keep its JSAs. Nexstar argued in filings with the FCC that Media General's existing JSAs should be grandfathered for 10 years, as other existing JSAs were. Media General also pursued a court case against Gray in state and federal court in Georgia that involved arguments against the JSA rule and the Media Bureau's anti-JSA stance in transactions (see 1603100058). Attorneys and broadcasters speculated the Georgia case could be a precursor to arguments in Nexstar/Media General. Both sides in the case recently informed the Richmond County, Georgia, Superior Court a settlement deal is under consideration, an attorney familiar with the case told us. The Nexstar spokeswoman declined to comment on how the company will handle Media General's JSAs.