Standard General’s Kim ‘bewildered’ by US FCC’s Tegna sale scrutiny

Standard General founding partner Soo Kim said he is “bewildered” by the growing federal scrutiny of his company’s US$5.4 billion deal to buy TV broadcaster Tegna.

In a letter Friday (Jun 3), the Federal Communications Commission (FCC) posed a series of questions, including how the deal for 64 TV stations would improve local broadcasting. Critics earlier said the transaction would lead to higher cable TV prices for consumers.

The administration of US President Joe Biden is moving to crack down on mergers, reflecting concern about widespread consolidation across industries. The FCC, an independent agency, is led by a Biden appointee.

“I’m bewildered because this deal does not create more concentration in the industry,” the South Korea-born Kim said in an interview. “It feels like we’re going through more scrutiny than other mergers that actually increased concentration and didn’t increase diversity.”

In its letter, the FCC asked whether the companies plan to coordinate with private equity firm Apollo Global Management, which is helping to finance the deal. The New York-based investment firm is acquiring preferred equity in the transaction that doesn’t have governance rights.

FCC questions

The agency also asked about possible strategies for negotiating agreements with cable providers for rights to carry TV station signals and inquired about “anticipated staffing reductions”. It set a Jun 13 deadline for responses.

“We intend to respond to the FCC promptly and in a forthright manner,” Kim said, adding that Apollo “is one of many financing sources to this deal, none of whom will have any control over the operations or strategic direction of the company”.

Tegna did not respond to requests for comment. Apollo declined to comment.

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Standard General, a private equity firm, agreed to acquire Tegna in February for US$24 a share. If the deal goes through, the company will be led by Deborah McDermott, chief executive officer of Standard Media Group.

Given the need for more diversity and women-run businesses in the sector, Kim said he would have thought the deal would be embraced by regulators.

On May 20, the FCC allowed critics of the proposed acquisition more time to make their case, after a union and consumer advocates said the deal would let private equity firms increase the prices Tegna charges pay-TV providers to carry its stations, raising costs for consumers.

Shares of McLean, Virginia-based Tegna fell as much as 1.9 per cent after the FCC’s letter was published but closed little changed at US$21.82 in New York. BLOOMBERG