After Nexstar/Tribune and Apollo/Cox, More TV M&A Coming -- Exact Deals Unclear

“We’re going to see more” mergers and acquisitions, said Kalil media broker Frank Kalil. The cash flow multiples on broadcast stations mean they can yield quick profits and currently, “money is cheap,” Kalil said of low interest rates that are continuing to fall. Yet “there isn’t anything obvious in the pipeline,” said Gray Television Vice President-Government Relations and Distribution Rob Folliard. Cox and Cordillera solicited buyers when they were ready to sell, but no groups are obviously doing so now, he said.

Several analysts pointed to a potential a sale by Tegna, possibly to Apollo. That's the best way to increase the value of Tegna’s stations, Wolfe Research analyst Marci Ryvicker told us. Its “high-quality, large market stations fit almost perfectly with Cox,” she emailed investors. Since Tegna doesn’t have a controlling shareholder, its board would decide, said S&P Global's Justin Nielson. Asked Friday about the possibility of a sale, a Tegna spokesperson directed us to an August statement that details past overtures from Apollo but doesn’t indicate Tegna’s receptiveness.

Meredith is also a possible sale candidate, but analysts don’t see it as a willing seller. “It seems like Meredith is not for sale,” said Nielson. The company’s wavering national advertising division and large tax burden make a sale unlikely, Ryvicker told investors. Tegna’s management team is seen as not necessarily favorable to a sale, Ryvicker said, though she believes a transaction's possible. Boards and executives aren’t always rational actors, she said. Meredith didn't comment.

In radio, prospective deals are less likely, analysts said. Radio combinations have turned out “rocky” for buyers such as Entercom, said Nielson. “The lesson learned here is large M&A does not tend to go as smoothly as initially expected,” Ryvicker wrote. Radio doesn’t offer the multiples TV does, and largely hasn’t attracted outside players such as Apollo, Nielson said. Though Apollo is also buying Cox’s radio stations, that’s considered due to cost efficiencies with the TV properties, he said.

Lack of new radio combinations could also be due to regulatory uncertainty, said media broker Robert Heymann, of Media Services Group. The FCC 2018 quadrennial review isn’t seen likely to progress until after a 3rd U.S. Circuit Court of Appeals decision on broadcast ownership rules (see 1906130052). “The biggest factor to radio dealmaking is the uncertainty of ownership rules changing,” Heymann said. His clients with grandfathered ownership won’t know their options until it’s clear what will happen to local radio ownership caps, he said. “With this looming as a possibility, the potential sellers are frozen until this issue has been decided one way or the other.” Others said regulation isn’t necessarily a factor. “There’s always fluctuations in regulation,” Kalil said.

More regulatory certainty wouldn’t necessarily jump-start dealmaking because DOJ likely would be a bottleneck, Folliard said. Broadcasters had considered a May Justice workshop on broadcast advertising a sign the agency could change its view of competition (see 1905030058). But a department complaint on the Nexstar/Tribune deal explicitly affirmed DOJ’s pre-workshop stance (see 1908010035).

“The workshop was a sham,” Folliard said. DOJ didn’t comment. The department is more regulatory now than the current FCC or the department itself under previous President Barack Obama, Folliard said. “We haven’t seen any sign that DOJ’s views have changed.”