Nexstar ‘Highly Engaged’ in Discussions With DOJ, FCC on $6.2 Billion Tegna Merger

Nexstar CEO Perry Sook says the company is “highly engaged” in active discussions with the Department of Justice and Federal Communications Commission as they review its proposed $6.2 billion merger with rival Tegna.

FCC chairman Brendan Carr and President Donald Trump have both expressed support for the deal. Its completion is dependent upon raising or eliminating the 39% national TV ownership cap, which limits how many TV stations at single entity can own. The cap was put in place by Congress in 2004 to ensure viewpoint diversity and prevent monopolization.

“Certainly having the endorsement of the nation’s chief executive doesn’t hurt in the regulatory agencies,” Sook told a Morgan Stanley investor conference on Wednesday when asked about President Donald Trump’s support for the deal. “That has brought focus to the transaction, and focus on the benefits that will come from from putting putting the transaction together.”

Sook noted that Nexstar has provided over 2 million documents to the DOJ following the agency’s second request for information, which “provides rationale that the definitions of markets and the definition of video certainly needs to evolve with the times.”

“I think that that will happen and our transaction will get approved by the end of second quarter,” Sook reiterated. “We fully intend to close as soon as we have that approval.”

Upon closing, Nexstar, together with its partners, will have 265 television stations in 44 states and the District of Columbia, representing 80% of U.S. television households. It will add Big-4 affiliate stations in markets including Phoenix, Atlanta, Toledo and Portland, Maine. The combined company will also have stations in nine of the top 10 markets, and in 41 of the top 50.

Together, Nexstar and Tegna will have combined net revenue of $8.1 billion and adjusted EBITDA before stock-based compensation of $2.56 billion, excluding synergies.

When asked if Nexstar would need to divest any stations in order to get the deal approved, Sook said that has “yet to be determined in any definitive fashion” but that it will have a “de minimis” financial impact on the overall deal.

Nexstar expects to generate synergies of approximately $300 million from the deal and return to its previous leverage target prior to the deal by 2028. Sook said that the synergy calculation will be adjusted to include real estate sales from the two companies’ overlapping operations in 35 markets.

“It won’t be anywhere near the number in the Tribune transaction of net proceeds from real estate but there is something there,” he said. ” Those are synergies that will be realized, by and large, in the first 12 months.”

Looking beyond the Tegna merger, Sook said Nexstar’s M&A strategy would remain focused on the local end of the media ecosystem.

“While we have certain national assets, the vast majority of our revenue and EBITDA earnings will come from assets that are in our local markets. It’s durable, it’s the least sexy but the most sticky part of the media ecosystem. So I would think we will always look to expand our footprint of local television stations, but there’s also different kinds of digital video assets in local markets that could potentially be of interest,” he explained. “Everything has to be at the right price and has to be highly accretive. But we have a cable network and we have a broadcast network. We’ll always be opportunistic, but I think our focus will continue to be local.”

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