FCC asks more questions about the sale of Tegna

The Federal Communications Commission (FCC) is asking more questions about Standard General’s purchase of Tegna. The private equity company Standard General is trying to buy Tegna — one of the U.S.’s largest broadcast television station groups — with plans to take it private.

Tegna’s shareholders recently voted to approve the acquisition by Standard General. And the deal is still expected to close on schedule sometime in the second half of this year.

But the transaction must still get regulatory approval and other customary closing conditions.

Among its new questions, the FCC is asking how Standard General would negotiate retransmission agreements with cable providers for rights to carry TV station signals. It also asked about possible layoffs. And it asked for a detailed explanation with supporting data describing how the transaction would serve the public interest.

The FCC set a June 13 deadline for responses.

New Street Research policy analyst Blair Levin over the weekend wrote that the FCC’s additional questions “may not be bad but cannot be good” for the prospect of the deal closing.

Levin said, “We won’t have strong convictions on a likely outcome of the FCC deliberations until the pleading cycles are complete, but the information requests cause us to wonder whether the Bureau is gathering evidence that would enable the Chair to request two conditions for the deal.” Those conditions could be 1) No retransmission fee increases for some time; and 2) No material job cuts for some time.

Regarding retransmission fees, Levin said, “Part of the rationale for the deal is to engage in station swaps that enable an increase in retransmission consent fees. Given the inflation concerns by many policy makers, one could see certain decision makers at the FCC limiting the ability to do so.”

Other critics of the deal have said it will end up causing higher prices for cable TV customers.

And regarding possible job cuts, Levin said, “A number of policy makers have expressed concerns about financial buyers acquiring broadcast stations for the purpose of earning returns through reducing local news investments. Here too, we could see some at the FCC wanting to limit such moves.”

It’s possible a private equity buyer could walk from a deal that limits its ability to cut costs and increase retransmission fees.