In an unexpected move that comes just nine days before Inauguration Day and the departure of Chairman Tom Wheeler, the FCC this morning waived its prohibition on consummation of any transactions during the broadcast television spectrum incentive auction, which is set for Round 46 on Thursday morning (1/12).
As a result, Nexstar Broadcasting can proceed with its long-delayed closing of its merger with Media General.
The Commission’s decision to grant the waiver ends months of waiting for Nexstar, which has been told to wait until the end of the incentive auction. Stage 4 of the Forward Auction is set to begin next week.
The uncertain end of the incentive auction would have resulted in the FCC granting its approval of the Nexstar-Media General deal more than a year after it was announced.
On Jan. 27, 2016, Nexstar and Media General reached a stock and cash transaction valued at $4.6 billion. This came after Media General and Meredith Corp. agreed to terminate a $4.1 billion merger agreement forged between those two companies in September 2015. Following the closing of Nexstar’s merger with Media General, the combined company will take on the name Nexstar Media Group Inc.
On Sept. 2, the Department of Justice gave its blessing to Nexstar Broadcast Group’s $4.6 billion merger acquisition of Media General Corp. – so long as Nexstar shed seven stations in six different markets.
Following the DOJ’s OK, George Reed, Managing Director of Media Services Group, told RBR + TVBR, “There are no real FCC issues, and I don’t see any reason why it wouldn’t close.”
But there was one issue: FCC rules prohibiting the closing of any deals while wireless services companies bid for spectrum from broadcast television companies.
That led to three Democratic members of the U.S. House of Representatives to draft a letter to FCC Chairman Tom Wheeler expressing their concern about “the possible unintended impacts the moratorium could have in diversity in broadcast ownership.”
For Nexstar to gain DOJ approval of its Media General merger, it was ordered to follow through on the following transactions:
- KWQC-TV, in Quad Cities, Ill.-Iowa and WBAY-TV, in Green Bay, Wisc., to Gray Television Inc.
- WSLS-TV, in Roanoke-Lynchburg, Va. to Graham Holdings
- KADN-TV and KLAF-LD, in Lafayette, La. to Bayou City Broadcasting Lafayette Inc.
- WFFT-TV, in Fort Wayne and WTHI-TV in Terre Haute, Ind. to USA Television MidAmerica Holdings Inc.
The holdup on the Bayou City deal, in particular, was a key point of frustration for Reps. Cedric Richmond (D-Louisiana), Sheila Jackson Lee (D-Texas), and Yvette Clark (D-New York). The trio of African American Congressional members wrote to Wheeler that Bayou City “is the only African-American broadcaster in the United States to own, operate and manage every aspect of its television stations” and that any delay in the sale of the two Lafayette, La., stations to them would impact the growth and current operations of their business.
The note to Wheeler followed communication on Oct. 5, 2016 from the National Association of Broadcasters General Counsel and EVP/Legal and Regulatory Affairs Rick Kaplan. The NAB has been very adamant in getting an FCC waiver from the Wheeler-led Commission, and in his letter to Wheeler, Kaplan said, “The merits of the proposed transaction have been thoroughly and comprehensively argued before the FCC, and the Department of Justice has blessed the merger. There is no good reason for further delay.”
ADDITIONAL DIVESTURES SEEN TO FINALIZE DEAL
Two Media General stations will come under Nexstar control in Albuquerque — KRQE-TV and KASA-TV. These stations are part of divestiture plans that now include the sale of five additional stations, in order to comply with the national audience cap.
These additional stations are Nexstar-owned KREG-TV in Denver, WCWJ-TV in Jacksonville, and KQTV-TV in St. Joseph, Mo.; and Media General’s KIMT-TV in Rochester, Minn./Mason City, Iowa and WLFI-TV in Lafayette, Ind.
With these sales, Nexstar Media Group will have attributable interest in television stations having an aggregate national audience reach of 38.91%, calculated without applying the previous UHF discount.
COX, DISH, CWA LOSE PLEADINGS AGAINST APPROVAL
The FCC ruled against an argument from Cox that 55% of its subscribers reside in DMAs with broadcast stations owned by Nexstar or Media General, and that the “aggregation of market power to create the largest broadcast station group in the nation would threaten significant anticompetitive effects and other public interest harms.”
At issue are retransmission fees, a contentious issue with many MVPDs and broadcast TV stations at the moment. Cox argues that this “disproportionate over-representation” would give the post-merger Nexstar the incentive and ability “to extract unreasonable fees and to inflict related harms through retransmission consent negotiations with Cox.”
DISH argued that the transaction “threatens to drive up retransmission consent fees (and consumer prices) and to increase the risk and incidence of broadcast programming blackouts in the impacted DMAs.”
Meanwhile, a coalition comprised of Communications Workers of America, Free Press, Common Cause, Public Knowledge, and the Open Technology Institute at New America told the FCC that a merger between Nexstar and Media General shows that Nexstar fails to demonstrate why such a large company would serve the public interest.
In its 32-page report and order, the Commission disagreed with each of the three entities.
“We recognize that the proposed transaction offers certain benefits related to the establishment of state news bureaus and access to the Washington, D.C. news bureau,” the FCC declared, adding, “We give little weight to the applicants’ contentions that as a result of the transaction the combined entity would be a more attractive partner to MVPDs and would enjoy greater strategic alternatives outside of broadcasting.”
Also discussed in the Report and Order are legacy JSAs. The Commission extended the cut-off date for five JSAs until Sept. 30, 2025 was dismissed as moot.
The FCC said, “Significantly, the 2016 Quadrennial Second Report and Order also declared that, ‘[u]ntil that time, such grandfathered agreements will not be counted as attributable, and parties will be permitted to transfer or assign these agreements to other parties without terminating the grandfathering relief.’ Therefore, the assignment of these agreements from Media General subsidiaries to Nexstar does not create attributable interests for Nexstar, and the compliance with the Local Television Ownership Rule renders moot any request for waiver.”
RBR + TVBR