Standard General and Apollo Global Management are teaming up for the deal, which will see them buy the company for $24 per share, Tegna said Tuesday. The private equity giants beat out a rival offer from Byron Allen’s Allen Media Group, which had partnered with Ares Management on the bid. Under the pact, the company will become the “nation’s largest minority-owned, woman-led broadcast group,” the deal partners said.
“The transaction has an equity value of approximately $5.4 billion and an enterprise value of approximately $8.6 billion, including the assumption of debt,” the companies said. The price tag represents a premium of approximately 39 percent to the company’s closing share price on Sept. 14, the last full trading day prior to media speculation about a potential sale first emerged.
Following the close of the transaction, expected during the second half of 2022, Deb McDermott will become CEO. She currently serves as CEO of Standard Media and has more than 20 years of experience in the sector, including previous roles as COO of Media General and as CEO and president of Young Broadcasting. Soo Kim, founding partner of Standard General, will serve as chairman.
An affiliate of Standard General “will hold substantially all of the voting, common equity in the new entity that is acquiring Tegna, with Cox Media Group and funds managed by affiliates of Apollo Global Management to hold securities in the new entity that will be non-voting and non-attributable and with other investors holding non-voting interests,” they said. A syndicate of banks led by RBC Capital Markets will provide debt financing.
Tegna owns 64 local TV stations in 51 markets and is the largest independent owner of NBC affiliates. The company was formed in 2015 when Gannett split itself in two, spinning out its TV station business as Tegna while retaining its legacy newspaper business.
Following the close of the deal, Tegna stations in Austin (KVUE), Dallas (WFAA and KMPX) and Houston (KHOU and KTBU) are expected to be acquired by Cox Media Group, and Tegna’s over-the-top advertising platform Premion “is expected to operate as a stand-alone business majority owned by Cox Media Group and Standard General,” the companies said.
Both Standard General and Apollo are no strangers to the local TV business. Standard General previously led Young Broadcasting out of bankruptcy, with the company also acquiring a controlling stake in Media General, which sold to local-TV giant Nexstar in 2018.
Apollo, meanwhile, owns the TV stations that had been operated by Cox Media Group, having acquired them in 2019. The company also acquired a $760 million stake in Dune producer Legendary Entertainment earlier this year.
Apollo’s existing ownership of TV stations could put the deal for Tegna under closer scrutiny from the federal government. “We view the challenges to get this deal through regulatory approval as low,” Wells Fargo analyst Steven Cahall said in a report. “Standard General, Cox, Apollo and TEGNA are all very familiar with the FCC’s regulations, and thus are likely to offer a deal that is fully compliant with the ownership cap. The station divestitures are the best evidence.”
The Tegna board has unanimously approved the deal. “We are pleased to have reached this agreement with Standard General, which follows a thorough review of acquisition proposals received by the company,” said Howard Elias, chairman of the Tegna board. “After evaluating this opportunity against Tegna’s stand-alone prospects and other strategic alternatives, our board concluded that this transaction maximizes value for Tegna shareholders.”
Kim added that, “as long-term investors in the television broadcasting industry, we have a deep admiration for Tegna and the stations it operates and, in particular, for Tegna’s talented employees and their commitment to serving their communities.”
Dave Lougee, president and CEO of Tegna, called the deal “the next step in Tegna’s evolution,” saying it “recognizes the value of our portfolio of leading broadcast assets and innovative digital brands.” He added: “Our hard work has built a company that is a leading and trusted local news and media content provider in the markets it serves and has fostered a culture of diversity and inclusiveness.”
Cowen’s Cahall wrote about the deal: “Broadcast assets have great free cash flow, making them attractive to strategic and financial buyers. This consortium led by Standard General is a bit of both in our view. We think Apollo has been looking to partner its legacy Cox and Northwest Broadcast assets for some time with a bigger station group, while Standard General has been a long-time holder and long-time agitator via proxy battles with Tegna management. Thus, this deal seems to give everyone what they want.”