Nexstar/Tribune Application Doesn't Identify Most Divestitures, Seeks HDO Waiver

The divestitures, which analysts told us will likely be worth about $1 billion, include sale of Tribune’s “sidecar” stations operated through Dreamcatcher Broadcasting. Nexstar seeks waiver to allow the deal to proceed even though the hearing designation order against Sinclair/Tribune ties up many of the stations that would be involved in the transactions. Since the HDO hasn’t been resolved, “Tribune is procedurally unable to withdraw the Sinclair Applications” even though that deal is now moot, said Nexstar.

Though Nexstar’s application mostly identifies markets targeted for divestitures rather than specific stations, the application is seen as an attempt to mimic Gray/Raycom and Nexstar/Media General by avoiding sharing agreements and other arrangements that could hold up regulatory approval. “It’s clear that Nexstar is trying to learn from Sinclair’s mistakes,” said Free Press Policy Manager Dana Floberg, who opposes Nexstar/Tribune. “They’re trying to take care to do the bare minimum.”

Nexstar proposes to unload stations in the 11 markets where overlaps with Tribune would violate rules against duopolies or require top four showings, including Ames, Ohio; Fort Smith, Arkansas; Richmond; and Harrisburg, Pennsylvania. The application also identifies three individual stations in Virginia and Pennsylvania that will be sold. Nexstar will also seek permission to keep an existing top four duopoly in Indianapolis. The FCC and DOJ approved existing top four showings in Gray/Raycom, attorneys noted. Nexstar is also seeking reauthorization of satellite waivers in Denver and Indianapolis. The Tribune buy would put Nexstar over the ownership cap, to reach 47 percent of U.S. households. Though Nexstar has “committed” to divesting enough stations to come in under the 39 percent cap, the application doesn’t cite a plan.

The broadcaster will likely need to identify specific divestiture stations before the deal can be approved, said Holland & Knight's Charles Naftalin. It's likely working to finish negotiating deals before it files specifics with the FCC, said S&P Global analyst Justin Nielson. “Applications to divest stations sufficient to comply with the Duopoly Rule will be filed as soon as divestiture plans are finalized,” said the application. Gray and Tegna are among possible buyers for the divestitures, Nielson said. Nexstar, Sinclair and the FCC didn’t comment.

For the deal to proceed despite the outstanding Sinclair HDO, Tribune needs an FCC waiver of a rule barring companies from filing two applications for the same station, the application said. Though the application seeks the waiver to allow the deal to proceed despite the stalled HDO proceeding, lawyers said it’s possible the transaction could exert pressure on the FCC and new Administrative Law Judge Jane Hinckley Halprin to move that process forward.

Nexstar/Tribune is in the public interest because it will allow the company to increase resources for its news operations, enhance competition with other media companies, and maximize the benefits of ATSC 3.0, Nexstar said. The purchase “will equip Nexstar with enhanced operational efficiencies, allowing the company to maintain and expand its high level of local service,” the application said. The deal means more “outsize media consolidation” and won’t benefit the public, Floberg said: Free Press is considering filing in opposition to the deal, she said. “Being better than Sinclair isn’t good enough.”