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No Sharing Arrangements

Standard, Tegna and Apollo Respond to Media Bureau

Apollo Global Management and its subsidiary Cox Media Group’s noncontrolling shares in the company created by Standard’s $8.6 billion buy of Tegna wouldn’t give them influence over it or on retransmission consent negotiations, said a response from all four companies to the FCC Media Bureau, posted Tuesday. “The companies will continue to compete directly and vigorously in the handful of markets where both own stations,” said the response filing.

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This deal creates the incentives for anticompetitive conduct, and staff reductions.” said John Bergmayer, legal director at Public Knowledge, which opposes the acquisition. “I usually think it’s better to not create the incentives for bad stuff to happen -- not let the merger happen, and then rely on promises and current intentions.”

Broadcasters are watching the progress of the Standard/Tegna deal as a potential signal on how Chairwoman Jessica Rosenworcel’s FCC reacts to TV mergers and acquisitions, industry officials said. The agency approved Gray Television’s buys of Meredith and Quincy in 2021, but those deals didn’t have sharing agreements or unusual ownership arrangements. As proposed, the combined Standard/Tegna wouldn’t be close to triggering ownership caps, and it wouldn’t create a larger broadcaster because it shifts Tegna’s 64 TV stations to Standard while offloading Standard’s 4 current stations to Cox. The transaction would be partially financed by Cox’s parent Apollo, which would end up with non-controlling shares in the new Tegna. That stock arrangement is considered a possible sticking point for the FCC, but broadcast attorneys said if the agency can be satisfied the shares don’t give Apollo attributable control, the deal is likely to be approved.

The publicly available version of the broadcasters’ response submission doesn’t contain the contracts and other confidential documents submitted to the Media Bureau, but the companies said review of those documents will show the Media Bureau “the subordinated preferred stock interest held by funds managed by affiliates of AGM and CMG will not give either company a role in the merged company’s operations or, crucially, its retransmission consent negotiations. “Post-Transaction TEGNA will negotiate retransmission consent like any other station group -- in good faith and with an eye toward ensuring its stations can effectively compete,” said the response filing. Cox Media Group “will continue to negotiate retransmission consent for all of its Post-Transaction stations without involvement from any other station group.” Since Apollo won’t have an attributable interest in post-deal Tegna, joint negotiation would violate the FCC’s rules, the broadcasters said.

“Some of the representations in the public filing are incompatible with what their actual plans seem to be,” based on their confidential submissions, said Benton Institute for Broadband & Society Senior Counselor Andrew Schwartzman, who represents CWA in the proceeding. He declined to be more specific but suggested more information is likely to come out in petitions to deny the transaction next month. Attorneys for cable advocacy group the American Television Alliance and broadcaster Graham Media also requested confidential access in the proceeding.

The broadcasters also won’t enter into shared service arrangements or joint sales agreements with each other, the response filing said. “The Combined Company, AGM, and CMG have not entered into and will not enter into any Sharing Agreements or other agreements related to programming, operations, or sale of advertising with each other for any station.” “The basic response seems to be ‘But we won’t act on those incentives,’ or ‘We have no intention,’ or ‘We have no plans,’ said Bergmayer. Regulators shouldn’t just rely on those promises, he said.

Public Knowledge, Common Cause and the Communications Workers of America's NewsGuild sector argued that Apollo’s financing arrangement and the shares it will own in the new company could give it an attributable level of control through possible “loopholes” in the arrangement, such as if Standard defaulted on obligations to Apollo. “Just as a mortgage lender may seize the home of a borrower who fails to make monthly payments, could Apollo seize control of broadcast TV stations in the event of a default by Standard General?” The “preferred securities that AGM and CMG will hold in Post-Transaction TEGNA do not give either company any right or ability to participate in the day-to-day management or operations of Post-Transaction TEGNA,” the response filing said. “AGM and CMG will abide by these contractual restrictions, and there is no other aspect of the Transaction that would allow AGM or CMG to gain access to Post-Transaction TEGNA’s competitively sensitive confidential information.”

The Standard/Tegna deal is in the public interest because it will vastly increase the number of minority-owned and woman-led broadcast stations in the U.S., said the broadcaster submission. The new company’s board chairman would be Standard founder Soohyung Kim, and its CEO Standard’s current CEO Deb McDermott. The deal would increase minority ownership of commercial full-power TV stations from 24 to 85, and the number of stations owned or controlled by Asian-Americans from four to 65, said the broadcast submission. “This Transaction would create, by far, the country’s largest minority-owned and female-led TV broadcasting company in U.S. history,” said the broadcasters. Standard and Tegna also said the purchase wouldn’t lead to newsroom staffing cuts, and would increase the effectiveness of the local station newsrooms by giving them access to a Washington bureau. PK, Common Cause and CWA disagreed in a filing last month, saying the deal “portends less local journalism and more commoditized national news, meaning of course less focus on the stations’ local communities.”