NXST, TGNA Stocks Jump After-Hours: FCC Clears $6.2B Merger Backed By Trump Amid Looming Legal Woes

• Nexstar said it has closed the merger transaction, which had been in regulatory review for seven months.
• The Federal Communications Commission approved the deal, waiving a rule that bars a single company from owning TV stations reaching more than 39% of U.S. households.
• Attorney generals from eight states, and DirecTV, have sued to block the merger on antitrust grounds.

Shares of Nexstar Media Group (NXST) and Tegna (TGNA) jumped 3.1% and 9.3% respectively in extended trading on Thursday, after the U.S. broadcast regulator approved their $6.2 billion merger and Nexstar announced the closure of the deal. 

The deal had been dragging on for months after the two sides signed the agreement last year due to prolonged regulatory scrutiny, particularly because it required relaxing of a federal rule for the broadcast sector. 

Broadcast Cap Relaxed

In a statement on Thursday, Federal Communications Commission Chairman Brendan Carr said the agency waived a rule that bars a single company from owning TV stations reaching more than 39% of U.S. households. The combined entity would cover at least 60%.

“Waiving that rule here is consistent with longstanding FCC authorities and doing so promotes the underlying purpose of the FCC’s media regulations by promoting competition, localism, and diversity,” Carr said in a statement.

Nexstar owns or partners with more than 200 stations in the U.S., while Tegna runs 64 stations and networks. A favourable regulatory outcome in the deal had become imminent last month after U.S. President Donald Trump reversed his earlier stand and indicated support for the Nexstar-Tegna merger. 

“This transaction is essential to sustaining strong local journalism in the communities we serve,” Nexstar CEO Perry Sook said, adding that Nexstar will be a “stronger, more dynamic enterprise” after the merger. “We are grateful to President Trump, Chairman Carr, and the DOJ for recognizing the dynamic forces shaping the media landscape and enabling this transaction to move forward,” Sook said.

Eight States, DirecTV Sues To Block The Deal

The development comes a day after a group of attorneys general for eight states, including California and New York, filed a lawsuit seeking to block the merger, arguing that the tie-up violates federal antitrust law.

They were joined on Thursday by DirecTV, which also filed a lawsuit seeking to block the merger. “Nexstar’s purpose in acquiring Tegna is to drive up the price it can extract from DirecTV and other distributors, which will force them to raise prices to their subscribers,” the company said.

Retail View Neutral

On Stocktwits, retail sentiment for NXST and TEGNA remained ‘neutral’ as of late Thursday, with traders viewing the deal’s closure as “very positive news”.

Nexstar shares have declined by about 12% since their peak on March 5, but are still up nearly 11% year to date. Tegna shares were up nearly 4% year to date, as of their last close.

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