TEGNA Terminates Deal With Standard General – Merger Arbitrage Mondays

Standard General’s acquisition of TEGNA (TGNA) was terminated last week after succumbing to an entire year of regulatory hurdles.

The bidding for TEGNA began way back in 2019 when Apollo Global Management (APO) approached the company to bulk up its ownership of television stations. This was followed by TV station operator Gray Television (GTN) making an offer to acquire TEGNA for approximately $8.5 billion. In September 2021, the company received takeover interest from media mogul Byron Allen and private equity giant Apollo Global Management.

TEGNA entered into an agreement to be acquired by Standard General in February 2022. The regulatory hurdles preventing the deal to close, began in May last year.

Timeline of the Regulatory Issues

May 11, 2022: TEGNA and Standard General received a request for additional information and documentary material from the DOJ.

June 3, 2022: Bloomberg reported that TEGNA’s sale to Standard General is coming under more scrutiny from US regulators after critics said the deal would boost prices for consumers.

September 29, 2022: According to Reuters, The Federal Communications Commission asked for further information pertaining to TEGNA’s planned sale to Standard General.

October 6, 2022: House Speaker Nancy Pelosi Commerce Chairman Frank Pallone (D-NJ) sent a letter to the Federal Trade Commission to express their concerns about the proposed purchase of TEGNA.

October 6, 2022:Standard General issued a statement regarding its pending acquisition of TEGNA, stating that the proposed TEGNA transaction complies with all FCC rules without the need for any waivers, divestitures, or special treatment.

October 17, 2022: Standard General responded to the repeated ad hominem attacks made by opponents of its proposed acquisition of TEGNA at the U.S. FCC, raising concerns with certain opposing parties’ conduct in the proceeding.

November 3, 2022:According to Bloomberg Law, Justice Department officials are scrutinizing whether Standard General LP’s proposed purchase of broadcaster TEGNA could lead to higher cable prices.

November 18, 2022: The National Telecommunications and Information Administration, on behalf of the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, submitted a filing with the FCC confirming it has no objections to the transaction.

November 22, 2022: TEGNA extended the end date for its sale to Standard General from November 22, 2022, to February 22, 2023.

December 19, 2022:Standard General issued a statement regarding its pending acquisition of TEGNA, stating that it has committed to waiving certain contractual rights it would have had as a result of the transaction.

December 23, 2022: According to Bloomberg, regulators have asked for additional comments on Standard General’s proposed purchase of Tegna.

January 11, 2023: Sen. Elizabeth Warren (D-MA) urged the Federal Communications Commission to block TEGNA’S planned sale to Standard General due to competition concerns.

January 13, 2023: Standard General sent a letter to Sen. Elizabeth Warren (D-MA) seeking to meet regarding her comments on the TEGNA deal.

January 26, 2023: According to a New York Post report, the DOJ is said to be “within days” of possibly clearing Standard General’s planned purchase of TEGNA.

February 6, 2023: In a letter posted to the FCC docket, Dish Network urged the FCC to deny Cox’s request to strike from its record a portion of the term sheet DISH received from Cox.

February 21, 2023: TEGNA extended the outside date of its merger agreement with Standard General to May 22, 2023.

February 24, 2023: According to Reuters, the Federal Communications Commission said it would hold a hearing on Standard General’s bid for TEGNA, a step that has historically led deals to collapse.

February 27, 2023: Standard General is vowing to continue its efforts to complete its proposed transaction with TEGNA.

March 28, 2023: Standard General filed suit against the Federal Communications Commission in the U.S. Court of Appeals.

April 6, 2023: A letter to the FCC by Senator Ted Cruz was disclosed about the TEGNA transaction.

May 16, 2023:Standard General provided additional information to the Federal Communications Commission to addresses potential concerns around the two issues raised in its Hearing Designation Order, related to its acquisition of TEGNA.

May 22, 2023: TEGNA’s sale to Standard General was terminated after failing to win regulatory approval. Following the termination, TEGNA announced a $300 million accelerated share repurchase program and a 20 percent increase in its quarterly dividend.

The deal financing deadline for Standard General was on Monday, May 22, 2023. With the the FCC issuing a hearing designation order (HDO), the prospects of the deal getting regulatory approval looked bleak. The deal was then bumped to an Administrative Law Judge, who would review concerns, regarding potential increases in retransmission fees and the impact the deal would have on local newsrooms. The ALJ decided to postpone the hearings, a move that clearly was a deal breaker and lead to the termination of the transaction.

Soon after the deal fell apart, Byron Allen signaled that he’s interested in potentially acquiring TEGNA. “It’s more challenging, but there’s a way to get a deal done of that size,” Allen said on Bloomberg Television. “It’s key to be clear with regulators of what you want to do. I don’t think we will have an issue there whatsoever.”

Standard General will transfer TEGNA shares valued at the $136 million termination fee to the TV broadcaster. TEGNA also announced a $300 million share repurchase plan and a 20% increase in its quarterly dividend, from 9.5 to 11.375 cents. The ASR agreement with JPMorgan Chase Bank is expected to be completed by the end of Q3.

I was long the TEGNA deal just like I was long First Horizon and this comes as a double blow in the same month. Fortunately both are good businesses and their stocks will eventually recover from this setback.

Merger Arbitrage activity increased significantly last week with eight new deals announced, two deals closing, and one deal terminated.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) which automatically updates itself during market hours.

Merger Arbitrage

Deal Statistics:

New Merger Arbitrage Deals:

1. The acquisition of VectivBio Holding AG (VECT) by Ironwood Pharmaceuticals (IRWD) for $1 billion or $17 per share in cash.
2. The acquisition of PDC Energy (PDCE) by Chevron Corporation (CVX) for $7.6 billion in an all stock deal. Under the terms of the agreement, PDC shareholders will receive 0.4638 shares of Chevron for each PDC share.
3. The acquisition of Greenhill & Co (GHL) by Mizuho Financial Group (MFG) for $550 million or $15 per share in cash.
4. The acquisition of Apexigen (APGN) by Pyxis Oncology (PYXS) for $16 million in an all stock deal. Under the terms of the agreement, for each share of Apexigen common stock, Pyxis Oncology will issue 0.1725 shares of its common stock. We added APGN as a potential deal to the Deals in the Works section on February 27, 2023, and the price after the news of the potential deal came out was $0.87.
5. The merger of The Necessity Retail REIT (RTL) with Global Net Lease (GNL) for $3.7 billion in an all stock deal. Under the terms of the Merger Agreement, RTL stockholders will receive 0.670 shares of GNL for each common share of RTL.
6. The merger of Desktop Metal (DM) and Stratasys (SSYS) in an all-stock deal valued at approximately $1.8 billion. Under the terms of the agreement, Desktop Metal stockholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal stock.
7. The acquisition of Wireless Telecom Group (WTT) by Maury Microwave for $19.84 million or $2.13 per share in cash.
8. The acquisition of Embark Technology (EMBK) by Applied Intuition for $71 million or $2.88 per share in cash.

Deal Updates:

1. On May 23, 2023, Triton International Limited (TRTN) by Brookfield Infrastructure Partners L.P. (BIP) filed a Pre-Merger Notification and Report Form pursuant to the HSR Act with the DOJ and FTC on May 10, 2023. The companies also filed their draft joint voluntary notice to obtain CFIUS clearance on May 10, 2023.
2. On May 24, 2023, IVERIC bio (ISEE) and Astellas Pharma filed a notification and report form with the DOJ and the FTC under the HSR Act. The applicable waiting period will expire on June 23, 2023.
3. On May 25, 2023, VMware (VMW) announced that Karen Dykstra will take on the role as CFO and EVP in addition to her current role as a member of the VMware Board of Directors. Current VMware CFO and EVP Zane Rowe will be leaving the company, effective June 9, 2023.
4. On May 26, 2023, Home Point Capital (HMPT) and Mr. Cooper Group filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on May 24, 2023.The waiting period will expire on June 8, 2023, and the waiting period with respect to the MSR (Mortgage Servicing Rights) Purchase will expire on June 23, 2023.

Approvals:

1. On May 22, 2023, Prometheus (RXDX) announced that the applicable waiting period under the HSR Act, in connection with the merger with Merck (MRK) has expired.
2. On May 24, 2023, Evoqua Water Technologies (AQUA) announced that it has received all regulatory approvals required to complete the merger with Xylem (XYL). The merger is expected to close on or about May 24, 2023.
3. On May 25, 2023, the European Commission unconditionally approved the merger between Credit Suisse (CS) and UBS Group AG (UBS) under the EU Merger Regulation.
4. On May 25, 2023, Qualtrics International (XM) obtained the final clearance or approval under applicable foreign antitrust laws required for the consummation of the merger.
5. May 26, 2023: The waiting period under the HSR Act, with respect to the acquisition of Heska Corporation (HSKA) by Mars, Incorporated expired on May 15, 2023.

Hurdles:

1. May 22, 2023: According to Reuters, Microsoft (MSFT) evaded a potential early legal obstacle in its deal to acquire Activision Blizzard (ATVI), when a U.S. judge on Friday refused to allow gamers in a private suit to preliminarily block the acquisition.
2. May 24, 2023: According to Reuters, Microsoft (MSFT) filed an appeal against Britain’s decision to block its takeover of Activision Blizzard (ATVI).

Shareholders Meeting Schedule:

1. National Instruments Corporation (NATI) announced that the special meeting of stockholders will be on June 29, 2023.

Closed Deals:

1. The acquisition of Evoqua Water Technologies (AQUA) by Xylem (XYL) on May 24, 2023. It took 121 days for this deal to be completed.
2. The acquisition of Sisecam Resources (SIRE) by Sisecam Chemicals Wyoming on May 26, 2023. It took 114 days for this deal to be completed.

Terminated Deal:

1. On May 22, 2023, TEGNA’s (TGNA) sale to Standard General was terminated after failing to win regulatory approval. Following the termination, TEGNA announced a $300 million accelerated share repurchase program and a 20 percent increase in its quarterly dividend.

Weekly Spread Changes:

The table below shows weekly spread changes between May 19, 2023, and May 26, 2023.

Top 10 Merger Arbitrage Deals With The Largest Spreads:

Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as “special situation” deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.

Deals In The Works

Seven new potential Merger Arbitrage deals were added to the ‘Deals In The Works‘ section last week.

1. On May 19, 2023, GoHealth (GOCO) received a proposal for cash consideration of $20 per share from its two largest shareholders Centerbridge Partners and NVX Holdings.
2. May 22, 2023: According to WSJ, Activist investor TCS Capital Management has built a stake in Yelp (YELP) and is calling on the service-recommendation site to explore options including a sale.
3. May 22, 2023: According to the 13D filing,  Concentra Biosciences offered to buy Atea Pharmaceuticals (AVIR) for $5.75 a share in cash
4. May 23, 2023: According to WSJ, Choice Hotels International (CHH) is seeking to buy Wyndham Hotels & Resorts (WH).
5. May 24, 2023: According to Reuters, Avid Technology (AVID), a provider of video and audio editing software and equipment to filmmakers and recording studios, is exploring a potential sale.
6. May 25, 2023: According to Reuters, Global grain trader Viterra is in talks to merge with U.S. rival Bunge (BG).
7. May 26, 2023: Taro Pharmaceutical Industries (TARO) received a non-binding offer from its majority shareholder Sun Pharmaceutical to acquire shares, it doesn’t already own for $38 per share in cash.

Updates

1. Creative Realities (CREX) rejects the $2.85 per share in cash revised proposal by Pegasus Capital Advisors, L.P.
2. GoHealth (GOCO) forms a special committee to evaluate $20 per share takeover bid from the investor group.

SPAC Arbitrage

SPAC IPO

1. On May 24, 2023, Inflection Point Acquisition Corp. II (IPXXU) announced the pricing of an upsized $220 million IPO.

SPAC Business Combination

1. On May 22, 2023, Everest Consolidator Acquisition Corp. (MNTN) entered into a business combination agreement with Unifund Financial Technologies, Inc.
2. On May 22, 2023, Genesis Growth Tech Acquisition Corp. (GGAA) and NextTrip Holdings entered into a definitive Agreement and Plan of Merger.
3. On May 25, 2023, CompareAsia Group Capital Limited and Bridgetown Holdings Limited (BTWN) entered into a business combination agreement. Upon closing, the combined company, MoneyHero Limited, is expected to begin trading on NASDAQ under the ticker symbols “MNY” and “MNYWW.”

Completed

1. On May 23, 2023, Roth CH Acquisition IV Co. (ROCG) announced the completion of its business combination with Tigo Energy, Inc. (TYGO).

List of all pending Merger Arbitrage deals:

Disclaimer: I have long positions in Activision Blizzard (ATVI), Spirit Airlines (SAVE),  Tower Semiconductor (TSEM), First Horizon (FHN) and TEGNA (TGNA). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.