SACRAMENTO—Following a hearing in Federal Court on April 7 on whether Nexstar can continue go forward with its $6.2 billion deal to acquire Tegna, LightShed Partners financial analyst Richard Greenfield has issued a note to investors arguing that he expects California District Court Judge Troy Nunley to grant a preliminary injunction halting the deal and that the ruling could have a major impact on dealmaking in the broadcast station sector.
As previously reported, a temporary restraining order (TRO) halting the merger between Nexstar and Tegna was issued by U.S. District Judge Troy L. Nunley in California in the U.S. District Court Eastern District Of California. The ruling blocks the two companies from proceeding with integration of their operations until the court rules on whether or not to issue a preliminary injunction in an antitrust case filed by DirecTV that seeks to block the deal. The Federal Communications Commission and the Department of Justice had earlier approved the deal.
The court heard arguments from both sides during a hearing on April 7 that was attended by Nexstar chairman and CEO Perry Sook.
At the end of the hearing Judge Nunley indicated that he would release a full ruling by Friday, April 10. Following the hearing, several published accounts (available here, here and here) indicated Judge Nunley seemed likely to issue the preliminary injunction based on his reaction to the arguments.
“Given the harshness of Nunley’s March 28th Temporary Restraining Order (link), we believe the most likely outcome is a preliminary injunction barring further integration,” Greenfield wrote in a note to investors. “What will be most interesting is whether Nunley acknowledges the challenges highlighted by Nexstar in their response to the TRO or maintains the same strict `keep separate’ order for a transaction that has already closed.”
“If the Nexstar case goes to trial, the best case is likely a mid-to-late Q4 hearing, with a decision in early 2027 and an appeal process that could eat up most of 2027,” he added.
“Remember, with the broadcast ownership cap effectively waived by the FCC to clear a path for consolidation, the Nexstar/Tegna merger was expected to drive a wave of consolidation over the next couple of years, including Nexstar and its peers,” he concluded. “We suspect this litigation could chill near term M&A across the broadcast sector, reducing the odds of a near-term settlement.”
The deal also faces ongoing litigation from Newsmax Media and several pay TV groups who have filed a motion in United States Court Of Appeals for the District Of Columbia Circuit seeking to halt the deal.
Other parties have filed papers with the Federal Communications Commission asking it to reconsider its approval of the $6.2 billion deal.
