Nexstar-Tegna Merger Cheered By Wall Street And Local TV Rivals

Wall Street is upbeat about the impact of Nexstar‘s $6.2 billion acquisition of local TV rival Tegna, mainly because it could trigger another wave of consolidation. That’s also the prevailing view across the industry, even among Nexstar’s biggest rivals.

Nexstar announced the closing of the transaction Thursday evening, soon after the FCC and the Department of Justice said they had granted their approval.

Legal challenges remain, however, with state attorneys general and major pay-TV operator DirecTV filing lawsuits seeking to block the deal. The state AGs followed up Friday by filing an emergency motion for a temporary restraining order. Other parties are making noises about suing over the way the deal breezed through regulatory review, requiring just four months and not being put to a vote of the full commission at the FCC.

Investors not only cheered the outcome for Nexstar, boosting its shares by 2%, but also bought into major station owners Gray Media and E.W. Scripps, each of whose stocks climbed 3% on Friday. Shares in No. 2 station player Sinclair, which took an unsuccessful run at Scripps last fall and is conducting a strategic review of its broadcast assets, were unchanged.

Unlike other media deals like Paramount’s pending acquisition of Warner Bros. Discovery, the Nexstar-Tegna combination is not viewed warily by other local station owners – at least not the large ones hoping to get even bigger. In signing off on the deal, the FCC issued a waiver to allow the combined company to exceed the current 39% ownership cap. Together, Nexstar and Tegna proposed a combined footprint reaching 80% of the U.S. After the divestitures of six stations, the reach will be a bit less, but still unprecedented in scale.

Because not all top-tier owners compete in every one of the 210 markets measured by Nielsen, the prevailing view is favorable toward the relaxation or removal of the ownership cap. With more freedom to maneuver, there will be more deals, most companies have argued for years. More deals means more growth, which will bring financial benefits but also, proponents say, a necessary backstop for local journalism. (Opponents of the Nexstar deal vehemently dispute that characterization.)

“There is no doubt that having a precedence of such a large transaction like Nexstar–Tegna go through and people seeing what the rules are on a firm basis is going to be exceptionally helpful for M&A,” Sinclair CEO Chris Ripley told Wall Street analysts last month on the company’s fourth-quarter earnings call. “It is going to be very helpful in terms of paving the way for future transactions. And we, specifically, are not standing still.”

That sentiment was repeated by numerous other competitors contacted by Deadline. “We don’t necessarily view Nexstar as a rival,” one said. “We work together on a lot of initiatives, and the feeling is also that the cap has prevented us from being able to compete with larger media and tech companies.”

Curtis LeGeyt, CEO of the National Association of Broadcasters, issued a statement supporting the change to the ownership cap but not, technically, the merger itself. It has been a delicate dance for the major trade group to try to look out for members’ diverse range of business interests given the political climate and the propensity of FCC Chairman Brendan Carr to fiercely defend President Donald Trump. After Trump posted on social media last month about the need to finalize the deal in order to bolster competition “against THE ENEMY, the Fake News National TV Networks” (a dynamic put on vivid display last fall during the ABC-Jimmy Kimmel suspension drama), Carr immediately echoed the sentiment.

“While NAB does not take a position on the merits of any individual transaction, today’s action by the FCC and DOJ to approve the Nexstar-Tegna merger is a meaningful sign that the Commission understands the urgent need for ownership reform,” LeGeyt said. “We are grateful to Chairman Brendan Carr for his recognition that the national ownership cap is outdated and no longer reflects today’s media marketplace. This decision is an important acknowledgement that the media marketplace has changed and giving stations the ability to achieve greater scale is essential to sustaining trusted local journalism and emergency reporting. We look forward to continuing to work with the Commission as it modernizes its rules to ensure that broadcasters can continue to serve their local communities across the nation.”

Guggenheim Securities analyst Curry Baker mentioned the FCC-Trump exchange in a note to clients Friday. “Our view had been that the transaction was on-track to close relatively soon” given those February comments, he wrote, and certainly on the company’s target of sometime before June. Regarding the lawsuit by the state AGs, Baker said he is “skeptical of their standing and the merits of their case.” Now that the transaction is closed and approved by regulators, he added, “our view is the case is unlikely to yield material results.”

Baker retains a “buy” rating on Nexstar’s stock, with a 12-month price target of $290. Wells Fargo analyst Steven Cahall on Friday increased his target from $250 to $290, also with an “outperform” (buy) rating.