As we began detailing here yesterday, the dealmaking in the local television station business is poised to heat up faster than the cast members on “Love Island.” As the nation awaits the promised major deregulation decisions of the Federal Communications Commission (hoping that those files weren’t sitting anywhere near those Epstein files that disappeared right off the US Attorney General’s desk), we decided to do some good old-fashioned, journalism-adjacent speculating and throw out some potential pairings of would-be station buyers and sellers.

We labelled this being a big money version of the coming-of-age game known as “Spin the Bottle.” You’d be forgiven if your immediate thought was that it was an empty bottle of Jack Daniels that was doing the spinning. Our first installment looked at the suitors for the television stations of Atlanta-based Cox Media Group. That is a deal that everyone is seemingly expecting “any day now.” But as of this writing, it still hasn’t happened. Today, we’re going to look at a deal that no one seems to be speculating about. Except uniformed speculators, like us.

Once again, let us run the disclaimer from our fictional legal team of Dewey, Cheatem, & Howe, who ask us to let you know that what follows is pure speculation, based on the reading of tea leaves and listening to various sources of gossip. No actual financial advice is being given and none of your money should be invested accordingly.

With the fine print out of the way, let’s meet today’s contestants!

Couple Number Two – TEGNA and Hearst

We can hear your surprise or is that just a snort of derision? Could be either. Of course, TEGNA is a strong candidate to be in the circle around the spinning bottle once again. The company was this close to being acquired by Soo Kim’s Standard General in a $8.6 Billion deal (including assumption of debt) that cratered in May of 2023, right after those fun-killers at the FCC slow rolled the deal into a hearing before an Administrative Law Judge. That was never getting on the docket, and TEGNA terminated the merger agreement. It also pocketed a $136 Million termination fee that we sure hope is helping to cover the salaries of all those new Vice Presidents of Content they are hiring.

Our AI chatbot, “ClosedFOS” (not a real AI startup) tells us this helpful bit of spin about the deal’s collapse: “The failed acquisition is seen as a cautionary tale for private equity and hedge funds seeking to take over local media companies, especially when public interest concerns are at stake.”

So instead of some other private equity hedge fund acquiring TEGNA, why not consider a marriage with an actual media company, based in the United States? One that might know a little something about running successful television stations. We know, we know-the word “successful” is key there. But it would be hard to argue that Hearst Television, the broadcasting subsidiary of Hearst Communications, is deinitely (again according to our AI chatbot) “a major player in the broadcasting industry, known for their local news leadership and diverse programming.”

That description is actually pretty accurate.

Hearst Television owns a total of 34 local television stations across 28 markets. It is one of the top ten largest TV groups, and is the only one to be privately owned, in this case by the Hearst family trust that descended from the newspaper empire built by William Randolph Hearst, beginning in the late 1800’s. It became the biggest media conglomerate in the world by the 1920’s, when it began adding radio stations and later, in 1948, beginning its television ownership with WBAL-TV in Baltimore.

The parent company of Hearst Communications hasn’t given up on its newspaper roots. Just last week, it agreed to acquire the corporation that owns The Dallas Morning News for $14 a share in cash, representing a 219% premium for what the shares in DallasNews Corporation had been trading for, prior to the announcement. Hearst will fold the Dallas Morning News into its existing portfolio of newspapers, which includes in Texas, the Houston Chronicle, the Austin American-Statesman, and the San Antonio Express-News, and smaller papers in Beaumont, Laredo, Midland and Plainview, Texas, as well.

DallasNews is the last remaining part of the A.H. Belo Corporation, which used to be a substantial television station owner. Belo would sell its portfolio of TV stations to newspaper giant, and USA Today publisher, Gannett, back in 2013.

Two years later, Gannett followed Belo’s move of splitting itself in two, the newspaper and publishing company retaining the original name and the broadcasting entity becoming a new company with the anagram-based name of TEGNA.

TEGNA now has 64 television stations in 51 markets across the country. In 2023, the company had revenue of just under $3 billion dollars. Its stock was trading north of $17 a share at the time this article was written. If the price of $8.6 Billion ($24 a share, plus debt) was valid in 2023 when the stock was also trading in the same range, the price to buy TEGNA would hopefully now be within the same ballpark?

Why would Hearst want TEGNA? The only place where both already own a television station is in market number 49, Louisville, Kentucky. (WLKY, the CBS affiliate is Hearst’s there and WHAS-TV, the ABC affiliate is TEGNA’s) That’s a market with no major network duopolies, aside from Block Communication’s Fox affiliate WDRB also owning CW affiliated WBKI, so it might be possible to keep both under one roof. Even if not, a Hearst-TEGNA hookup could result in a major group with 100 stations, across some 79 different markets.

(Erratum post-facto: A faithful Topline reader notes that there is another market with both Hearst and TEGNA stations. In the Triad of Greensboro/High-Point/Winston-Salem, Hearst owns NBC affiliate WXII and TEGNA owns CBS affiliate WFMY. We regret the original oversight.)

And not to be crass about it, but in the coming era for local television station ownership, size will definitely matter. Would it be the worst thing in the world to own some television stations in markets where you also owned the newspaper?

Wait, maybe you are thinking there might be some government restriction on that kind of media consolidation? Well, once upon a time, there was. In 1975, the FCC under the administration of President Gerald Ford instituted a ban on a single entity owning both a newspaper and broadcast stations in the same market. The FCC proposed lifting that long-standing ban in November of 2017, but there was a slew of legal challenges to the proposal. The Supreme Court of the United States ultimately upheld the FCC’s decision, and the FCC formally implemented the changes that ended “the cross-ownership ban” in June of 2021.

Could a Hearst-TEGNA hookup happen in the future?

As Major Bowes, who had a wildly successful radio show featuring amateur talent acts (think the great-great-grandfather of “America’s Got Talent”) back in that medium’s heyday before television arrived, would say as he spun his own “Wheel of Fortune” (before Pat Sajak was even born): “Round and round she goes, where she stops, nobody knows.”

So too for our “Spin the Bottle” scenarios for “the big deal of the day” perhaps forthcoming in the TV station business. (With apologies to Wayne Brady and before him Monty Hall, both hosting “Let’s Make A Deal.”) We’ll be back with another potential deal to discuss tomorrow. Like Amazon’s Prime Day, we’re stretching it out to nearly a week.

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