Tegna Inc. on Monday terminated its proposed acquisition by hedge fund Standard General LP, delivering the final blow after a prolonged regulatory review that serves as a possible deterrent to other broadcast deals.
Tegna quickly announced a $300 million share buyback program and a 20% increase in its quarterly dividend and said it was returning excess capital accumulated since the deal was announced in February 2022.
The TV broadcaster said it terminated the $5.4 billion transaction because the deal didn’t receive approval from the Federal Communications Commission by Monday’s deadline. The agency scrutinized the transaction for more than a year, never holding a vote. Tegna said it’s entitled to the $136 million breakup fee stipulated in the original deal.
The outcome leaves Standard General Managing Partner Soo Kim without a prize he had long sought. The hedge fund didn’t respond to a request for comment Monday afternoon.
Wall Street banks that committed to funding the buyout lost a liability as the deal perished. A syndicate led by Royal Bank of Canada provided up to $8.2 billion in debt, including a $500 million revolving credit facility, according to an amended filing from April 2022.
That debt was likely underwritten at terms that would be difficult to sell to investors today as borrowing costs in the leveraged finance markets have skyrocketed. Banks that underwrote commitments to fund deals last year have been forced to sell the debt at steep discounts, which can erode fees or even result in outright losses.
The FCC stymied the deal, sending it to a lengthy hearing that itself was put on hold, without public discussion or a vote by the agency’s four commissioners. The course taken under Chairwoman Jessica Rosenworcel is seen as “making all deals more unpredictable” and is “negative for capital infusions into broadcasting,” Blair Levin, an analyst at New Street Research, wrote in a note Monday.
The FCC didn’t reply to a request for comment. Royal Bank of Canada also didn’t respond to a request for comment.
McLean, Virginia-based Tegna has 64 TV stations in 51 markets.
The FCC had said the transaction proposed in February 2022 might trigger price increases for consumers as TV stations boost charges for cable providers, and could also reduce local content on TV stations.
Tegna announced the termination of the deal after markets closed on Monday. The stock fell 2.8% to $15.73 in regular trading in New York.
Author: Todd Shields and Jill R. Shah