Broadcasters Expect Wave of Deals After Shutdown Ends
The federal shutdown is keeping the FCC from processing transfer-of-control applications, but broadcasters are expecting a wave of station deal approvals when it ends, they told us in interviews. Being unable to file paperwork doesn’t delay negotiations, broadcasters told us. “We can’t file anything because nothing’s open right now,” said Circle City Broadcasting CEO DuJuan McCoy, who announced an $83 million deal Tuesday to purchase WRTV Indianapolis (ABC) from E.W. Scripps. “When you're doing deals, you worry about what you can control, and that's signing a deal, negotiating a deal and locking it up.”
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On Oct. 23, the 8th U.S. Circuit Court of Appeals issued the mandate for its July 23 ruling (see 2507230063), knocking down the FCC’s prohibition on mergers that lead to common ownership of two or more top-four stations in the same market. If that hadn’t occurred during the shutdown, there would already be a wave of applications for station swaps that would result in top-four duopolies, Gray Television Senior Vice President Rob Folliard said in an interview. “Obviously, the FCC isn't open, but as soon as the FCC reopens, those are now going to be ripe for action,” he said. “We may start seeing decisions very soon after the government shutdown ends."
Deal flow "is strong as ever," agreed Kalil & Co. President Fred Kalil. "The fact that it's shut down is only slowing down the process, not the transactions."
Tideline Partners media broker Greg Guy said that with the demise of the top-four prohibition, it would make sense for larger broadcasters to engage in a round of swaps to improve their positions in particular markets. Station swaps are an easy way for a broadcaster to improve its cash flow without spending money, he noted. “That is just way too attractive to ignore, given the kind of capital challenges and the debt structures that these companies piled on to get as big as they are now.”
Guy said the shutdown doesn’t keep companies from discussing potential deals, but the delay in their consummation can affect things. The FCC “isn’t granting anything. They’re not accepting applications or processing anything,” he said. "There's still a lot of conversations going on. ... There are deals being struck and negotiated, but it's slowing things down by a month." Delays mean additional costs and can lead to companies reexamining a potential transaction and choosing to pursue other options, he added. “Time is not the friend of any deal.”
McCoy said that for him, the delay on deal approval caused by the shutdown hasn’t amounted to much so far. “There's always going to be a lag in doing a deal versus regulatory approval, and perhaps it might be a little longer now due to the shutdown, but I don't think it deters any business dealings or any negotiations going on,” he said. “I think there’s a lot of wheeling and dealing going on right now. I don’t think the shutdown has at all affected the amount of deal flow behind the scenes."