A judge has extended a temporary restraining order against the $6.2 billion Nexstar-Tegna merger on Friday.
The move will give U.S. District Judge Troy Nunley another seven days, or until April 17, as he prepares a ruling on whether a preliminary injunction is needed to outright block the deal, which would create the largest broadcast station group in the U.S. reaching 80% of American households.
On March 27, Nunley put the deal on pause in response to a federal antitrust lawsuit by DirecTV. A group of eight state attorneys general led by California and New York also filed a separate lawsuit seeking to block the merger, which has since been consolidated into one legal action. The legal action came after Nexstar-Tegna was approved by the FCC and DOJ last month and closed just minutes later.
The group alleges the proposed combination would “irreparably drive up consumer costs, reduce local competition, shutter local newsrooms and increase both frequency and duration of blackouts of key local teams and network programming.”
In addition to the seven-day extension, Nunley has also modified the order after Nexstar and Tegna warned that it would cause “immediate operational harm” and couldn’t be fully complied with. The modifications are as follows:
- The TRO (paragraphs 1, 2, 4, 5, 9, and 10) shall allow Nexstar to undertake ordinary course cash management, ordinary-course intercompany transfers, and ordinary-course debt service and repayment activities necessary to comply with Nexstar’s financing obligation, including refinancing activities, security perfection, and guaranty, provided that Nexstar does not use this provision as a pretext to undermine TEGNA’s viability as a going concern
- The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow Nexstar to take reasonable actions necessary to maintain TEGNA’s day-to-day operations, including authorizing routine financial transactions such as wire transfers for ordinary course payments, without violating the TRO’s prohibition on “influence”
- The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow Nexstar to take actions necessary to establish a functional governance structure for TEGNA, including appointing or reappointing officers, to the extent necessary to permit TEGNA to fulfill the TRO. It shall not be considered “influence” for Nexstar to provide and implement Sarbanes-Oxley requirements, including setting thresholds for contract approval, expenditure authorization and other financial limits similar to the interim operating covenants that applied to TEGNA’s independent management of the business pre-closing. Nexstar shall not appoint current Nexstar employees, or former employees employed within the prior six months, as TEGNA officers and no TEGNA officer shall be an officer of Nexstar;
- The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow Nexstar to take all reasonable steps to perform all obligations required under its debt instruments, SEC reporting requirements, or refinancing transactions, including coordination with TEGNA personnel as necessary, provided that such coordination is narrowly tailored to complying with reporting requirements and avoiding breaches under debt instruments. This includes permitting Nexstar to complete required SEC and debt agreement reporting for the combined company within applicable deadlines, oversight by Nexstar management as to the accuracy of TEGNA financial statements, including compliance with internal controls and procedures, in coordination with TEGNA personnel. If the sharing of TEGNA’s confidential information with certain Nexstar employees is necessary to accomplish such reporting requirements, such information must be maintained separately from Nexstar’s files and used solely for those reporting requirements;
- The TRO shall allow Nexstar to require that management of TEGNA adhere to the interim operating covenants set forth in the Merger Agreement (ECF No. 63-4), in their entirety, and in the same manner as applied pre-closing, provided however that TEGNA shall continue to have authority concerning ordinary course contracts, including contracts concerning retransmission consent, as provided by operating covenant 6.1(b)(xiii);
- The TRO (paragraphs 1, 2, 3, and 4) shall allow Nexstar to appoint or reappoint TEGNA 23 officers as necessary for TEGNA to exercise independent decision-making authority for retransmission matters. Nexstar shall not appoint current Nexstar employees, or former employees employed within the prior six months, as TEGNA officers and no TEGNA 26 officer shall be an officer of Nexstar
- The TRO shall allow Nexstar to require that management of TEGNA adhere to the interim operating covenants set forth in the Merger Agreement (ECF No. 63-4), in their entirety, and in the same manner as applied pre-closing, provided however that TEGNA shall continue to have authority concerning ordinary course contracts, including contracts concerning retransmission fees, as provided by operating covenant
Nunley’s decision follows an hours-long hearing that was held in Sacramento, Calif. on Tuesday for Nexstar-Tegna and DirecTV and the state attorneys general to present their arguments.
Nexstar attorney Alexander Okuliar argued during the hearing that the combined entity’s larger size would be critical to protecting local broadcast news and would help the companies better compete against Big Tech.
“We don’t want local broadcast to end up like the local newspaper industry did 30, 40 years ago,” he said.
The deal gives Nexstar a total of 265 television stations in 44 states and the District of Columbia, adding Big-4 affiliate stations in Phoenix, Atlanta, Toledo and Portland. The combined company will also have stations in nine of the top 10 markets, and in 41 of the top 50.
Approval of the deal was subject to raising or eliminating the 39% national TV ownership cap put in place by Congress in 2004 to protect viewpoint diversity, as well as prevent monopolization. However, instead of modifying the ownership rules, FCC Chairman Brendan Carr granted the companies a waiver and asserted that the decision would empower broadcast TV stations and foster local journalism. Additionally, Nexstar agreed to divest six stations across six different DMAs and agreed to make commitments to affordability and localism, helping close the deal.
Nexstar shares are up over 4% on Friday following Nunley’s order.
