Nexstar Media Group Inc.'s $4.1 billion bid to buy Tribune Media Co. may test the Federal Communications Commission’s decision to allow some media companies to own two major TV stations in the same market.
The FCC in November 2017 voted 3-2 to end a ban on such ownership, instead allowing such arrangements on a case-by-case basis if the agency finds them to be in the public interest. Nexstar and Tribune stations overlap in 15 media markets, Bloomberg Intelligence analyst Matthew Schettenhelm said in a note.
“Depending on the exact stations at play, Nexstar could test that new standard,” Schettenhelm said.
The agency hasn’t clarified when it will approve or deny such arrangements. Nexstar and Tribune plan to divest some stations to comply with FCC ownership rules.
The Justice Department, which is also expected to review the merger, may prove the bigger hurdle if Nexstar hopes to own two stations in a market.
“It’s unlikely that the DOJ will allow the company to own two ‘top 4' stations” in any media market, Bloomberg Intelligence analyst Jennifer Rie said in an email.
The Nexstar-Tribune deal was hatched after the collapse of Sinclair Broadcast Group’s $3.9 billion proposed purchase of Tribune. That deal faltered amid FCC concerns that Sinclair may have misrepresented its proposed divestitures of some stations to federal regulators.
In the wake of the scuttled Sinclair-Tribune deal, Nexstar may be wary of seeking similar divestiture deals as the FCC reviews its purchase of Tribune, Schettenhelm said.
Sinclair’s experience “certainly would point Nexstar away from divesting to companies with close ties to Nexstar itself,” Schettenhelm said.
Media companies can’t own TV stations that collectively reach more than 39 percent of U.S. households. Irving, Texas-based Nexstar owns or operates more than 170 stations, including NBC, CBS, ABC and Fox affiliates, which it says it reach about 38.7 percent of U.S. households. Chicago-based Tribune owns or operates about 40 stations across the country.
The Justice Department may also scrutinize the companies’ advertising revenues. The agency is unlikely to allow the combined company to have a market share of more than 40 percent of broadcast station gross advertising revenues per media market, Rie said.