Tegna's Lougee Condemns FCC Process, Standard Wants Hearing to Proceed
“Nobody really knows what the FCC was thinking,” said Tegna CEO Dave Lougee Thursday on the company’s first earnings call since it agreed in 2021 to be bought by Standard General. Standard hasn’t responded to requests for comment on the deal’s termination, but it told the FCC in a Wednesday status filing it's ready to continue with the hearing process even without a deal at stake. “Standard General remains prepared to vindicate its rights as necessary, including through participation in the hearing and attendant discovery process.” The FCC, other parties in the case and the administrative law judge are more likely to view the matter as moot, said broadcast attorneys, who don’t expect the hearing to move forward. Tegna and Cox Media Group told the FCC Thursday that they wouldn't participate further in the hearing.
Lougee seconded comments from Standard General Managing Partner Soohyung Kim that the companies had almost no interaction with the FCC during the deal process and said the FCC designating the matter for hearing while not providing feedback to the broadcasters is “a conundrum” for the whole industry. “People don't really know what to make of it because of what was a frankly unprecedented process,” Lougee said. The FCC and Standard didn’t comment on Lougee’s remarks.
Tegna is due a $136 million termination fee under the merger agreement, and Lougee said the companies have agreed Standard will pay that fee in shares of Tegna’s stock, with payment expected to be completed within days. Standard is currently Tegna’s largest shareholder, but neither Tegna nor Standard responded to questions about whether the payment would change that status. Tegna announced share buybacks and a dividend increase earlier this week (see 2305220068). “Beyond these actions, Tegna’s board of directors and management team are actively reviewing the return of additional excess capital that accumulated during the pending merger,” Lougee said. The Standard/Tegna deal wasn’t an example of media consolidation because it involved stations being spun off to Cox Media Group, Lougee said. “Tegna was actually getting smaller,” Lougee said. “So it really wasn't consolidation.”
With rising interest rates, concerns about “macroeconomic headwinds” and regulatory uncertainty, it's unlikely that Standard or Tegna will seek to get involved in another deal soon, said Gregory Guy, Patrick Communications media broker, in an interview. Those factors are also likely to deter any potential alternative buyers of Tegna. The financial environment “has changed significantly” from when the Standard/Tegna deal was proposed, Guy said. Standard’s Kim made similar comments (see 2304180074. “I don't want to imply that we're now coming out of the chute and ready to go buy a bunch of things,” Lougee said Thursday. “This is a time we like having a conservative balance sheet position.”
Standard’s status report suggesting the ALJ hearing could continue even with the transaction dead is likely a defensive maneuver against future litigation over the deal’s collapse, attorneys said. The agreement required the parties to do their utmost to get regulatory approval or pay penalties, and lawsuits followed other deals that broke up after being designated for hearing (see 1808090042). The FCC’s hearing designation order concerned the facts of the agreement and didn’t accuse Standard of a lack of candor or fitness to be an FCC licensee, one attorney familiar with FCC hearing processes said. Since those sorts of allegations could affect future license renewals, they would motivate a broadcaster to continue with the hearing. Because those allegations aren’t present here, there's no reason to continue the process, attorneys said. Holland and Knight broadcast attorney Charles Naftalin said he’s not aware of any precedent for a hearing continuing past a deal’s demise. “I would suspect that the ALJ would find that position moot and dismiss that proceeding,” he said.
Tegna submitted its own status report Thursday saying it won't be part of future hearing proceedings. "In light of the termination of the Agreement, TEGNA will withdraw the TEGNA Application," the brief filing said. "TEGNA will no longer participate as a party to the Hearing." Cox Media Group and its affiliate Teton Parent Corp also submitted a status report Thursday saying they won't participate in the hearing proceeding and are withdrawing their applications. "Due to limitations of the FCC’s Licensing and Management System, neither CMG nor TPC can withdraw the remaining applications to which CMG and its affiliate are the proposed purchaser," said a footnote in the status report.
“Standard General steadfastly maintains that the applications were unlawfully designated for hearing,” said Standard General's status report. “The record before the Commission contained all documents and information necessary to find that grant of the applications would serve the public interest without need of a hearing, and Standard General has no doubt that a hearing would bear this out.” In an April status hearing, ALJ Jane Halprin put the proceeding on hold and asked the parties to submit status reports by June 1 to allow her to decide if the case would continue past the May 22 termination date. In that hearing, Standard’s attorney, Scott Flick, told Halprin that continuing the hearing past May 22 would be “a pointless activity,” according to the FCC’s transcript. “We don't want to engage in pointless activities as well,” Flick said then.