After years of pushing for a deal, hedge fund manager Standard General LP finally struck an agreement to take TEGNA Inc. private.
Following months of rumors and speculation, the companies said Feb. 22 that an affiliate of Standard General agreed to acquire broadcaster Tegna for $24 per share in cash. The transaction has an equity value of about $5.4 billion and an enterprise value of about $8.6 billion, including assumed debt.
Standard General teamed up with alternative asset manager Apollo Global Management Inc. for the Tegna acquisition. Apollo itself had sought to buy Tegna and considered combining the latter's assets with those of Apollo's majority-owned company Cox Media Group Inc., a fellow broadcast station owner.
Regulatory odds
The question now is whether the deal will pass regulatory scrutiny. Cox Media and Tegna's combined market reach would surpass the 39% national ownership cap imposed by the Federal Communications Commission if the agency views the two companies as a single entity. The cap prohibits a single broadcast station group from owning TV stations that together reach more than 39% of U.S. TV households.
Under the deal, a Standard General affiliate will hold almost all of the voting shares in a new entity that will acquire Tegna. Cox Media and funds managed by Apollo affiliates will hold nonvoting, nonattributable securities in the entity, while other investors will own nonvoting interests. Cox Media is also expected to buy Tegna's stations in Austin, Dallas and Houston after the deal closes, which is expected in the second half of 2022.
In possible anticipation of a lengthy regulatory review, Standard General will pay an additional monthly "ticking fee" of 5 cents per share if the deal closes between nine and 12 months. The monthly amount increases to 7.5 cents if deal completion occurs within 12 to 13 months, 10 cents if between 13 and 14 months, and to 12.5 cents if within 14 to 15 months.
As part of the deal, Tegna's over-the-top advertising service Premion will operate as a stand-alone business, with Cox Media and Standard General owning a majority stake.
Back-and-forth battle
The deal agreement comes after a multiyear battle between Standard General and Tegna. After Tegna in August 2019 confirmed Apollo Global Management had expressed interest in taking the company private, Standard General said it would engage with Tegna as it considered strategic alternatives. In 2020, Tegna said two potential suitors had withdrawn their bids due to the pandemic, but Standard General blamed Tegna leadership for the deals falling apart.
Standard General, which owns an 11.8% stake in Tegna, subsequently launched multiple proxy battles, failing in 2020 and 2021 to get its nominees elected to the broadcaster's board. It even called for a full investigation into Tegna President and CEO Dave Lougee and at one point threatened legal action.
Tegna's board unanimously approved the transaction, which would result in its shares ceasing to trade on the NYSE. However, the deal remains subject to regulatory and Tegna shareholders' approvals, among other customary closing conditions.
Standard Media CEO Deb McDermott will become CEO of Tegna following the deal, replacing Lougee. McDermott is a former executive with Media General, which Nexstar Media Group Inc. acquired in 2017. Standard General founding partner Soo Kim will chair Tegna's new board.
Tegna shares closed at $22.44 on Feb. 22, up more than 7%.