Key Points
- Nexstar plans to operate TEGNA as a subsidiary while ongoing lawsuits challenge the $6.2 billion acquisition.
- The structure allows flexibility to separate the business if courts rule against the merger.
- Multiple legal challenges, including from states and DIRECTV, continue despite the deal’s closure.
Nexstar Media Group will operate TEGNA as a subsidiary business while a handful of lawsuits play out in court, according to sources familiar with the company’s plan and statements made to financial regulators this week.
The decision to operate TEGNA as a subsidiary business for now will allow Nexstar greater flexibility to spin out or otherwise separate the business if there are signs that judges overseeing a handful of lawsuits are likely to find in favor of those challenging the merits of the combination, the sources affirmed.
Nexstar revealed last Thursday that it closed on its acquisition of TEGNA within moments of winning key approvals from the U.S. Department of Justice (DOJ) and the Federal Communications Commission (FCC), which had been scrutinizing the $6.2 billion deal.
On paper, a Nexstar subsidiary called Teton Merger Sub absorbed TEGNA by agreeing to buy the company’s stock at $22 per share, a $2 premium over TEGNA’s closing price earlier in the week.
Documents filed with the U.S. Securities and Exchange Commission (SEC) on Monday confirmed TEGNA’s stock was suspended for trading by the New York Stock Exchange (NYSE) last week, with plans to fully de-list from the exchange by next Monday.
The closing of the transaction came less than a day after California and a half-dozen other states sued Nexstar and TEGNA in federal court, arguing the merger was illegal because it gave one company too much concentration of power and thus amounted to a de facto monopoly within the broadcast television industry.
Specifically, the states argued Nexstar would absorb one or two major network-affiliated stations — one that offers programming from ABC, CBS, Fox or NBC — in some markets where it already owns a major network-affiliated station.
Before the transaction, Nexstar was already the largest operator of local TV stations in the country, with more than 200 in its portfolio. Some of its operated TV stations are owned by third parties like Mission Broadcasting and White Knight Broadcasting. TEGNA owned or operated around 60 local TV stations.
Separately, DIRECTV is suing Nexstar and TEGNA in the same federal jurisdiction where the states are bringing their legal challenge, with the pay TV provider complaining that the deal allows Nexstar to raise cable and satellite fees by larger amounts in the future.
DIRECTV has engaged in programming-related disputes with Nexstar and TEGNA in the past; their stations have been unavailable to DIRECTV subscribers over significant stretches of time as the companies battled each other on fees charged for the privilege of carrying local TV stations on DIRECTV’s streaming and satellite platforms. Those fees are typically passed on to consumers in their bills.
Both lawsuits are proceeding, despite Nexstar’s assertion that it has already closed on its acquisition of TEGNA.
On Monday, additional legal challenges were filed against the broadcasters, with several broadband associations joining Newsmax in filing a petition for a restraining order at the D.C. Circuit Court of Appeals.
The petition comes after the groups requested the FCC to issue a stay to an earlier Media Bureau order that granted waivers of broadcast ownership rules to Nexstar, which allowed it to close on its merger with TEGNA.
Under current federal law, one broadcaster may not own local TV stations that reach more than 39 percent of the American viewing audience. The FCC has waived its ownership rules in rare, but specific, circumstances, typically allowing a broadcaster to acquire one or a small handful of stations that are considered underperforming in a market. The agency has never granted a blanket waiver covering dozens of TV stations in the past.
In its lawsuit, the broadband groups and Newsmax say the Nexstar-TEGNA deal appeared rushed, rather than going through the ordinary processes of scrutiny, fueled in part by President Donald Trump and FCC Chairman Brendan Carr’s personal desires to see the deal cross the finish line.
The FCC’s approval of this transaction…has been anything but ordinary,” the groups wrote. “Binding precedent from both this Court and the FCC requires the Commission to hold a hearing and put this major transaction to an up-or-down vote, to ensure a rogue Bureau is not running roughshod over statutory limits. But those precedents went out the window after the President’s social media missive, which Chairman Carr promptly echoed by directing the Media Bureau to ‘get [the deal] done.'”
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