Gray/Raycom 'Cautious Optimism' May Not Apply to Nexstar/Tribune
FCC approval Thursday of Gray Television buying Raycom without additional conditions is a positive sign for other broadcasters weighing deals (see 1812200065) but doesn’t shed much light on larger-scale deals such as Nexstar/Tribune, said attorneys, broadcasters and analysts in interviews the following day. “It provides cautious optimism,” said Patrick Communications media broker Gregory Guy. Staff OK is a sign Sinclair/Tribune’s dissolution didn’t stem from “a fundamental change” at DOJ or the FCC, he said.
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The $3.6 billion deal is limited to divestitures originally offered by Gray. DOJ had signed off on the purchase (see 1812140019), and the transaction is expected to close Jan. 1.
Broadcasters have been unsure how DOJ and the FCC would treat deals that followed the failed Sinclair/Tribune, so Gray/Raycom clearance provides clarity, said S&P Global analyst Justin Nielson. The deal’s approval is a “positive indicator” the FCC is still willing to approve large broadcast deals, Nielson said. The transaction included deeper consolidation in smaller markets, and other broadcasters eyeing similar purchases will feel more secure such deals are viable, Guy said.
Though Gray/Raycom includes two top-four combinations, commission OK doesn’t indicate how other top-four proposals would be received, numerous analysts and attorneys said. Though the Gray/Raycom top-four combos are the first approved under the FCC’s case-by-case policy, they existed when the deal was proposed. That’s a unique circumstance unlikely to apply widely, said Gray Chief Legal and Development Officer Kevin Latek in an interview, calling the Raycom combos a “purple cow.” Another top-four combination proposed separately by Gray in Sioux Falls, South Dakota, has remained stalled at the FCC for months, and industry officials said there’s no sign of anything happening there soon. The FCC’s top-four criteria are also a central topic of the just-kicked-off quadrennial review (see 1811080063).
Deals seeking to follow Gray’s path are likely to take the same tack of being upfront with divestiture plans and avoiding sales to related companies, said Fletcher Heald broadcast attorney Frank Jazzo, who is retiring after two-plus decades at the firm. “The lesson is that similarly structured deals can get through,” he said.
Nexstar CEO Perry Sook says the FCC will be provided a comprehensive divestiture plan with the Tribune deal. Even if the divestiture proposal is similar to Gray’s, Nexstar/Tribune will be more heavily concentrated in large markets, making it harder to use Gray/Raycom as an indicator of the Nexstar deal’s fate, Guy said. Still, Nexstar should see this approval as a good sign, Guy and Nielson said. Nexstar didn’t comment.