Sometimes a deal craters – this time, thanks to the FCC, a deal is leaving one. Townsquare Media has had a deal in the works to acquire 12 stations from New Northwest Broadcasters receiver Revitalization Trust in Yakima and Tri-Cities WA, where it already had 11 stations. To do so, it planned to place 11 stations in a divestiture trust. The FCC sided with two petitioners asking for a deal denial and dismissed the transaction outright.
The $6M deal was brokered by Kalil and Co., and it would have done transferred the following stations:
In Yakima: KJOX-AM/KRSE-FM/KXDD-FM/KHHK-FM, all Yakima; KARY-FM Grandview, and KBBO-AM Selah.
In Tri-Cities: KALE-AM/KEGX-FM/KIOK-FM Richland, KTCR-AM Kennewick, KKSR-FM Walla Walla & KUJ-FM Burbank.
An RBR-TVBR report/analysis of the deal is available here. It describes what Townsquare has in each market, what it was bringing in, how it planned to mix and match formats and facilities, and what was going into a trust in the aftermath.
The deal drew petitions to deny from Sunnylands Broadcasting, permittee of a new FM and Cherry Creek Radio, which has stations in Tri-Cities. They argued that the transaction “…fails to comply with long-established Commission policy concerning the permissible use of divestiture trusts, and that the proposed structure of the Divestiture Trust at issue is substantially different than those previously approved by the Commission. CCR asserts that the Assignment Applications propose a ‘sea change’ in the use trusts that would result in an ‘explosive extension of the Trust device, far exceeding anything previously sanctioned by the FCC.’”
The FCC agreed. It said trusts were for the use of “incidental” station overages resulting from a loss of grandfathered status or when they are a small part of a much larger deal. Although the principals in the immediate transaction said the overages qualified as incidental, the FCC disagreed, saying that this particular “use of a divestiture trust is neither incidental nor consistent with precedent.”
The FCC also noted that the transaction would result in TM having some an interest, either directly or via the trust it sets up, in 12 out of 28 Yakima stations and 11 out of 26 Tri-Cities stations.
In dismissing the transactions, the FCC went so far as to say they never even should have been accepted for filing in the first place.
RBR-TVBR observation: We really wondered if this would fly when it was announced in December 2010. The deal essentially would have allowed TM to pick the best stations – to make a poker analogy, dealing itself a full house – and then putting on the market a cluster of stations that would weigh in as something like two pair, jacks-high. If sold intact, the stations in the divestiture trust would be set up to be a second-tier local cluster in perpetuity. Frankly, we aren’t surprised that the petitioners succeeded in getting this deal nixed.
We posed it as a baseball analogy at the time. We wrote, “Imagine that in New York City the Mets acquire the Yankees, trade its weakest players for the Yankees’ best, and then put the Yankees back on the market. They’d have to find somebody willing to compete with the strengthened Mets using the weakened Yanks. And that, ladies and gentlemen, could be a tough sell.”