Sinclair remains bullish about the prospects for consolidation and M&A in the broadcast TV station market, CEO Chris Ripley told analysts on the station group’s first-quarter earnings call.
Ripley said the Federal Communications Commission and Justice Department’s recent approval of the $6.2 billion Nexstar Media Group-Tegna merger “will be tremendously helpful to the industry going forward and pursuing a much-needed consolidation.”
Ripley also pushed back against attempts by attorneys general in 13 states to block the Nexstar-Tegna deal on antitrust grounds, calling the lawsuit “very flimsy.”
“We have seen an approval of that transaction [Nexstar-Tegna] from both the FCC and the DOJ with no conditions and no divestitures required from the DOJ,” Ripley said. “So that is a huge change in the way the DOJ has historically looked at our market, which was defined as just competition amongst local broadcasters. And they have finally come up to date with the realities of the current marketplace, which is that we compete across many different mediums, including cable and connected TVs. So that's a huge win and it's been a long time in coming, and it will be tremendously helpful to the industry going forward and pursuing a much-needed consolidation.”
Ripley also said he expects that the FCC will also eliminate ownership caps on station groups. “I do think that will happen,” he said. “Of course, that’s up to the FCC. And certainly, as an industry, we have been lobbying for that. So it is something that I do expect will happen in the future. so that you don't have to rely on waivers.”
The rule changes, he said, mean that “we're going to head towards a marketplace where you've got two large groups that the industry consolidates up to, which still will be relatively small in the TMT [technology media and telecommunications] landscape, but will be much better competitors within that broader landscape as they improve on efficiencies and gain more access to better talent and open up business opportunities. So that's very exciting.”
He also pushed back against attempts by some AGs to block the deal. “We do think that the case brought against that deal is very flimsy in terms of the merits,” he said.
Ripley noted that seeing some of the objections raised by the AGs would help them in the future: “And we believe that now that we've seen the playbook, any future transactions, we can significantly mitigate a similar playbook in future transactions. And I think just there's a lot of unique features in the Nexstar-Tegna deal, like it was essentially a No. 1 and No. 2 coming together, which certainly wouldn't be what you would expect mathematically can happen in the next combination. And there was a bunch of optics around the deal, which didn't look great, which we're very unique to this situation.”
“We, of course…would rather Nexstar just proceed forward on a clean basis, but we have a lot of faith that they'll play through this,” he continued. “And we do think future large transactions will learn a lot from this process and be able to significantly mitigate the risk.”
In terms of Sinclair’s ongoing pursuit of a merger with Scripps, Ripley said: “As it relates to Scripps, the industrial logic is still there. Our position on the deal is still the same. As I mentioned in my remarks, we would be happy to pick up discussions again around such a transaction, but we are not standing still. We are looking at multiple other opportunities to achieve similar levels of benefits and synergies. So [we] will keep moving. And if something were to materialize with Scripps, great. But if not, we're moving forward.”
