Nexstar/Tribune Selling 19 Stations to Tegna, Scripps to Comply With FCC Limits
Nexstar and Tribune announced specific divestiture plans to unload 19 stations in 15 markets to Tegna and E.W. Scripps in connection with Nexstar's proposed buy of Tribune, said Nexstar Wednesday. The sale would yield $1.32 billion cash. Nexstar CEO Perry Sook earlier estimated the company would divest around $1 billion in TV stations to comply with FCC ownership rules. Opposition comments this week argued the proposed deal wasn’t yet “ripe” for review because specific divestiture plans hadn't been disclosed (see 1903190054).
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These asset sales would leave Nexstar/Tribune below the national audience reach cap, a broadcast industry official said. Sook thinks the cap should be abolished but also has recently supported an NAB plan to keep the current limit of 39 percent and extend a rebranded UHF discount to VHF TV stations. That would increase the threshold, letting companies owning any combination of stations effectively serve 78 percent of U.S. viewers.
The divestiture plan would see Tegna buying 11 stations in eight markets for $740 million and Scripps would buy eight stations in seven markets for $580 million. Nexstar said it's still “engaged in active negotiations” to divest two stations in Indianapolis. The divestiture plan doesn’t include any sales to Dreamcatcher or other “sidecar” companies. Analysts have said that’s likely to avoid regulatory holdups or complications similar to what befell Sinclair/Tribune. The proposed divestitures “mark an important step in fulfilling Nexstar’s commitment to regulatory bodies to divest certain television stations in order to comply with the FCC local and national television ownership rules,” Sook said. Nexstar isn't expected to pursue further divestitures.
Though Nexstar hasn't explicitly said the sales will put it inside the national ownership limit, the stations being divested suggest that's the case, said S&P Global analyst Volker Moerbitz in an interview. Since Nexstar/Tribune wouldn't have created duopolies in the New York, Phoenix or Miami markets, jettisoning valuable stations in those concentrated markets is likely for cap reasons, he said.
The deals are favorable for both Scripps and Tegna, emailed Noble Capital Markets analyst Michael Kupinski to investors. The transactions will give both companies additional stations in political battleground states, where spending for upcoming elections will be highest, he said.