Standard General and Apollo will pay $24 share for the company, which owns 64 stations in 51 markets and will become the nation’s "largest minority-owned, woman-led broadcast group."
Local TV giant TEGNA is selling itself to a pair of private equity firms in a multi-billion dollar deal.
TEGNA said Tuesday that Standard General and Apollo Global Management are teaming up for the deal, which will buy the company for $24 per share. The private equity giant defeated a rival proposal from Byron Allen's Allen Media Group, which had partnered with Ares Management on the bid. Under the deal, the company will become "the nation's largest minority-owned, female-led broadcasting 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 September 14, the last full trading day before media speculation about a potential sale first surfaced.
Following the closing 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 over 20 years of experience in this area, including previous roles as COO of Media General and as CEO and President of Young Broadcasting. Sue Kim, a founding partner of Standard General, will serve as chairman.
An affiliate of Standard General "will substantially hold all voting, common equity in the new entity receiving TEGNA with funds managed by Cox Media Group and associates of Apollo Global Management to hold securities in the new entity" non-voting and other investors having non-voting and non-voting interest,” he said. A syndicate of banks led by RBC Capital Markets will provide the 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 after Gannett split itself into two while maintaining its legacy newspaper business while spinning off its TV station business as TEGNA.
Following the end 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. “It is expected to operate as a standalone 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. After Standard General had previously ousted Young Broadcasting from bankruptcy, the company also acquired a controlling stake in Media General, which was sold to local TV giant Nexstar in 2018.
Meanwhile, Apollo owns TV stations that were operated by Cox Media Group, which acquired them in 2019. The company also acquired a $760 million stake in Dune producer Legendary Entertainment earlier this year.
Apollo's current ownership of TV stations could put TEGNA's deal with the federal government under closer scrutiny. "We see little of the challenges of getting this deal through regulatory approval," Wells Fargo analyst Steven Kahl 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 disinvestment of the station is evidence at best. "
The TEGNA board has unanimously approved the deal. "We have reached this agreement with Standard General after a thorough review of the acquisition proposals the company has received," said Howard Elias, chairman of the TEGNA board. "After evaluating this opportunity against TEGNA's standalone prospects and other strategic options, our Board concluded that this transaction maximizes value for TEGNA shareholders."
Kim added that, "As long-term investors in the television broadcast industry, we deeply admire TEGNA and the stations it operates, and especially TEGNA's talented employees and their commitment to serving their communities."
TEGNA President and CEO Dave Luggie called the deal "the next step in TEGNA's growth," adding that it "recognizes the value of our portfolio of key broadcast assets and innovative digital brands." He continued: "Our hard work has built a company that is a leading and trusted local news and media content provider in the markets and fosters a culture of diversity and inclusion."
Cowen's Cahall wrote of the deal: "Broadcast assets have great cash flow, which makes them attractive to strategic and financial buyers. This consortium, led by Standard General, is a little more than we think. That Apollo has for some time been looking to partner its legacy Cox and Northwest Broadcast assets with a larger station group, while Standard General has been agitating through proxy battles with longtime holder and longtime TEGNA management. Thus, this deal gives everyone what they want."