As expected, President Trump has named Republican Ajit Pai the new chairman of the Federal Communications Commission.
In a statement, Pai said he was "deeply grateful" for the appointment. "I look forward to working with the new administration, my colleagues at the Commission, members of Congress, and the American public to bring the benefits of the digital age to all Americans."
Pai will lead (for the moment) a three-member FCC, composed of himself and fellow GOP commissioner Michael O'Rielly and Democrat Mignon Clyburn.
Pai's leadership signals coming reversals on key issues most likely including the FCC's approach to net neutrality, broadband subscriber data privacy, and mergers (watching closely: investors of AT&T (NYSE:T), Time Warner (NYSE:TWX), Sprint (NYSE:S), T-Mobile (NASDAQ:TMUS), Comcast (NASDAQ:CMCSA) and Charter (NASDAQ:CHTR)).
Among the buyers of new stations tied to Nexstar Broadcasting's (NASDAQ:NXST) $4.6B deal for Media General (NYSE:MEG): Graham Media Group and Gray Television.
Graham (GHC -0.6%) closed its transaction to acquire WCWJ (CW affiliate in Jacksonville, Fla.) and WSLS (NBC affiliate in Roanoke, Va.) for $60M in cash and assuming liabilities. It will operate the stations under their existing affiliations.
Meanwhile, Gray Television (GTN -5.2%) has closed $270M in deals for WBAY (ABC affiliate in Green Bay, Wisc.) and KWQC (NBC affiliate in the Quad Cities Iowa market). On Friday Gray also closed on acquiring KTVF (NBC), KXD (CBS) and KFXF (Fox) in Fairbanks, Alaska, for $8M in cash from Tanana Valley Television Co. and Chena Broadcasting Co.
The $4.6B acquisition makes the renamed Nexstar Media Group the country's second-largest TV broadcaster. The broadcast portfolio is increased by about two-thirds and the company's reach has more than doubled in the deal, and it enters 15 new top-50 markets.
As planned, Nexstar has closed on divesting 13 stations (for an aggregate $548M) on which the deal's approval was conditioned.
With the deal done, Nexstar has boosted guidance for pro forma average annual free cash flow, to about $565M for the 2016/2017 cycle -- a little over $12/share -- from a previous $540M. With that, "We are extremely well positioned to immediately reduce leverage, evaluate additional accretive strategic growth investments and expand our return of capital to shareholders," says CEO Perry Sook.
There's another extension of a change of control offer to buy debt at Media General (MEG -0.2%), which has been stretching out its deadline as it continues pursuing a merger with Nexstar Broadcasting (NXST -1.2%).
An offer to buy all of its LIN Television unit's 5.875% senior notes due 2022 at 101% of principal was set to expire at midnight last night after previous extensions; it's now been extended again, to 11:59 p.m. ET on Dec. 30.
As of 5 p.m. yesterday, LIN had gotten tenders from holders of $6.55M in principal amount of the notes -- about 1.64% of outstanding principal.
Nexstar (NXST +0.3%) chief Perry Sook says he's a "patient man," but he's eager to get FCC sign-off on the company's deal for Media General (NYSE:MEG).
Named today one of the Library of American Broadcasting Foundation's 2016 industry giants, Sook suggested he's ready to get on with creating Nexstar Media -- a giant TV group which would have 171 full-power broadcast stations.
A slow-going FCC broadcast incentive spectrum auction is dragging the deal out, however. The agency said it wouldn't approve deals until the completion of the process, which is at least a couple of months away if not falling into 2017.
The company cleared antitrust issues and locked down a $2.75B loan, key to buyout financing. It's also filed a supplement to a waiver request with the FCC, pushing for prompt approval of the deal.
Sook says the new company will be more multiplatform than traditional TV group. “My job is to remind everyone that we are a local media business," he says. "We are in the business of creating and distributing local, relevant content ... and we help local businesses grow.”
Nexstar Broadcasting (NXST -0.4%) has priced a $2.75B term loan at a lower cost than it expected -- saving millions, it says, and locking down the financing for its acquisition of Media General (MEG -0.1%).
The company priced a $2.75B term loan B facility at 99.75% of face value, bearing interest at Libor plus 3% (with a 0% Libor floor), and a seven-year maturity.
Nexstar will use proceeds along with $900M from previously issued senior notes, cash from asset divestitures and some new stock issuance to fund the acquisition, repay its credit facilities, repay Media General indebtedness and cover fees and expenses tied to the deal.
With the major piece done, Nexstar says it will see interest expense $60M/year lower than it forecast, which should result in $40M of additional pro forma free cash flow. That means total free cash flow annually of $540M on average over the 2016-2017 period, it says.
Nexstar has filed a supplement to its waiver request with the FCC pushing for prompt approval of the deal.
Georgetown professor Andrew Jay Schwartzman says new FCC rules permitting transferability of joint sales agreements clears the way: "I don’t know but I’m pretty sure that this eliminates most of the obstacles that the FCC is going to have towards approving the Nexstar transaction."
The bigger catch is the FCC's dark period for approving deals while the broadcast incentive spectrum auction is under way. Stage 2 of that auction resumes today, but the sale is increasingly likely to last into 2017.
NXST is up 2.1%; MEG is up 1.5% and just pennies off its 52-week high.
The Justice Dept. gave its OK today, conditioned on the fact that Nexstar must divest seven stations (in six markets) to upfront buyers that the department has approved. Without such divestitures, Justice says, ad prices and fees charged to MVPDs would increase in those markets.
Technically, the DOJ filed a civil antitrust suit simultaneously with a proposed settlement requiring Nexstar to sell WBAY in Green Bay to Gray Television; WSLS in Roanoke-Lynchburg to Graham Holdings; KADN and KLAF in Lafayette to Bayou City Broadcasting Lafayette; STHI in Terre Haute to USA Television MidAmerica Holdings; WFFT in Fort Wayne to USA Television; and KWQC in Quad Cities to Gray.
A ruling that orders the FCC to update media-ownership rules may play a part in the agency's review of Nexstar Broadcasting's (NXST +0.9%) $4.6B offer for Media General (MEG +0.2%).
The issue concerns joint sales agreements that Nexstar doesn't want to dissolve. The company has requested a nine-year waiver on those rules concerning five TV markets, while critics say a long waiver would hinder diversity that is enforced in part by a cap limiting group ownership reach to 39% of TV households.
A full change by the FCC may be a while coming, while it finishes the broadcast incentive spectrum auction. Meantime, broadcasters have asked the courts to "wipe all the rules off the books in response."
The court said that while the judiciary owes deference to agencies, “we also recognize that ‘at some point, we must lean forward from the bench to let an agency know, in no uncertain terms, that enough is enough.’ ”
The FCC's approach to a license transfer in Nexstar Broadcasting's (NXST +1.5%) $4.6B deal to acquire Media General (MEG +0.9%) might be indicative of a difficult review ahead.
Barbara Esbin, an attorney representing the American Cable Association, notes that the FCC set up the review uncommonly as a "permit-but-disclose" proceeding, which allows anyone who wants to discuss the transaction to come and talk with the FCC without parties present -- provided they then disclose the presentation they made in a filing within two days.
“I think this is an early sign that the FCC has concerns about this … license transfer,” she said. “This is very unusual in a broadcast license proceeding.” A significant number of petitions to deny could gum up the works for a while.
Nexstar Broadcasting (NASDAQ:NXST) is pushing back against conditions pressed for by opponents of its $4.6B deal to acquire Media General (NYSE:MEG).
Nexstar says there's "no evidence" that the deal will result in higher costs for consumers or other harms. In fact, if the company can get higher retrans fees, “compensating broadcasters for the value that they deliver to viewers…is not against the public interest, and is a market driver for those broadcasters to increase the value they bring to viewers, benefiting both MVPD subscribers and over-the-air viewers.”
Amid a bitter retransmission dispute earlier this year, Cox Communications (the third-largest cable system) said it would oppose the merger and encourage its customers to take action as well.
Nexstar said Dish Network and other critics "have no evidence whatsoever" to support claims that channel blackouts are likely to rise as a result of the deal. It says that like other non-vertically integrated broadcasters, it has the same economic incentive to reach deals with program distributors.
Media General (MEG +0.6%) has amended a lawsuit it filed in a Georgia station dispute that may prove key to its planned merger with Nexstar Broadcasting (NXST +1.2%).
Last month Media General had decided to "go hard" against Gray Television (GTN +1.5%) and Schurz Communications over WAGT-TV in Augusta, Ga.
Media General had secured a lower-court injunction (since stayed) blocking Gray from taking over the station and putting its spectrum into the broadcast incentive auction, as WAGT had applied to do. WAGT's opening bid price in the auction is among the highest, at $210.4M.
But Media General has dropped opposition to Gray's takeover in one court while telling another that it should get all of any auction proceeds. Media General was tied up in a joint sales agreement at the station with Schurz -- the station's former owner that got bought out by Gray.
The FCC had made unwinding the JSA between Media General and Schurz a condition for approving Media General's merger with Nexstar.
Media General (NYSE:MEG) has taken an afternoon dip, now down 2.3% on heavy volume, as dealReporter says a Georgia station dispute with Gray Television (NYSE:GTN) could hurt its chances for FCC clearance of a merger with Nexstar Broadcasting.
Volume in Nexstar (NXST -2.6%) has ticked up this afternoon as well.
Media General has decided to "go hard" against Gray and Schurz Communications over WAGT-TV in Augusta, Ga., dealReporter says -- an odd stance since Media General is seeking an OK for a broad station merger with Nexstar.
Parts may be a little more valuable separately, but the assets are diverse and an all-at-once sale will be easier to pull off, banker sources say.
One said that Tribune parts are worth about $2B-$3B more than current enterprise value.
Private equity may take on the task of buying the whole company and then splitting it for value. A total sale would be complicated by complicated ownership rules regarding Tribune's broadcast station portfolio; eventual buyers for those could include Sinclair (NASDAQ:SBGI), Media Genera (NYSE:MEG), Nexstar (NASDAQ:NXST) and Hubbard.
Cox Communications, the nation's third-largest cable company, says it will oppose Nexstar's (NXST -3.3%) $4.6B deal to acquire Media General (MEG -0.1%), heading to the FCC to complain and encouraging customer action as well.
“Nexstar should not be allowed to become a larger company, which would force more cable TV/satellite companies and ultimately customers to pay higher fees for retransmission consent," Cox said. "This merger is bad for business, bad for consumers and is not in the public interest."
A combined Nexstar Media Group would have 171 full-power broadcast stations, most in the country.
Cox and Nexstar also happen to be in a pitched retransmission fight that threatens a blackout without some progress by tomorrow's deadline. Nexstar sees a merger as a way to improve its scale and position in retransmission negotiations.