A federal judge has ordered the $6.2 billion merger between Nexstar Media and local television group rival Tegna to be halted pending a court review of whether the partnership violates antitrust laws. But Nexstar and Tegna argue that they cannot fully comply with the court’s temporary restraining order, arguing that certain actions caused by the closing of the transaction are irreversible.
“Due to completed litigation and irrevocable legal obligations at the time of closing, defendants hereby notify the court that they are unable to enforce certain provisions of the TRO as written,” Nexstar and Tegna said in a Tuesday filing in the U.S. District Court for the Eastern District of California.
The companies said the temporary restraining order would “immediately result in operational harm, regulatory conflicts, and a governance vacuum for Tegna and Nexstar.” They outlined “clarifications and/or amendments” to the TRO and asked for the court’s “guidance” on this issue (see below).
Nexstar, already the largest local television station group in the United States, announced on March 19 that the deal with Tegna had been completed following approval by the FCC and Department of Justice. The combined company will have 259 full-power television stations (after selling six), affiliated with networks such as ABC, CBS, Fox and NBC, reaching approximately 80% of U.S. television households.
However, the day before that, on March 18, DirecTV and eight state attorneys general filed a lawsuit against both companies, seeking to block the merger on grounds of antitrust law. On March 27, Judge Troy Nunley granted DirecTV’s request for a temporary restraining order, prohibiting the immediate merger of Nexstar and Tegna, and ruled that the proposed merger “is likely to violate antitrust laws based solely on the combined company’s market share.” (In Tuesday’s ruling, Nunley ordered that lawsuits filed by DirecTV and states seeking to block Nexstar Tegna be combined into one lawsuit.)
Nexstar-Tegna’s filing in response to the TRO (available at this link) “contains confidential business information that would harm Nexstar if publicly disclosed,” the companies said.
“In closing, Nexstar and Tegna took a number of typical steps that may not have been obvious at the time the court issued the TRO,” the TV station group said. “Unlike traditional pending separation orders, it is particularly difficult to freeze a merger that has already taken place. Compliance with certain aspects of the TRO may be impossible and could jeopardize Nexstar and Tegna assets that the court seeks to preserve.”
First, both companies argued that “the business integration cannot be reversed without causing significant disruption to employee compensation.” Additionally, Nexstar said it has “ongoing reporting obligations under the SEC and debt agreements that require Tegna’s financial information to be included in Nexstar’s reports from the date of closing.”
Nexstar and Tegna also said that upon completion of the deal, Tegna’s retransmission agreements with pay-TV providers that also operate Nexstar stations were “contractually superseded by Nexstar agreements with those companies.” “This creates internal contradictions.
Tegna claims that “Tegna personnel must continue to control Tegna decision-making, including retransmission consent agreements and negotiations,” but these stations are currently contractually governed by Nexstar’s contracts, with no former Tegna personnel in the know.
“The TRO news has already caused confusion about its impact on the applicability of Nexstar contracts to Tegna broadcasters, and Nexstar is beginning to receive questions from distributors that will accelerate in volume and urgency as we approach the month-end billing cycle,” the companies said. “This creates operational disruption and accounting complexity that negatively impacts both Nexstar and Tegna.”
The companies also claimed that the FCC ordered Nexstar to take certain actions in connection with the approval of transactions that “appear to be inconsistent with the TRO.” This includes Nexstar’s efforts to sell six stations. Increase news programming in specific markets. And Nexstar will offer pay-TV providers with existing retransmission consent agreements (RCAs) that expire after Tegna’s termination date, November 30, 2026, “an extension of such RCAs at existing rates through November 30, 2026.”
Regarding staffing and workforce planning, the companies noted that Tegna has publicly announced a $90 million to $100 million cost reduction plan from February to June 2024 that will eliminate newsroom and support positions, consolidate station operations and management, and develop technologies such as AI automation. Tegna has made further job cuts this year. However, under the Nexstar and Tegna merger stay order, “it is unclear whether Tegna would be required or prohibited to implement pre-transaction reduction plans to maintain current staffing levels or increase staffing levels to a peak in 2025, which could result in financial harm to Tegna.”
These are the nine “clarifications and/or amendments” Nexstar and Tegna proposed to the TRO that were filed with the court.
Debt and Cash Management: The TRO (paragraphs 1, 2, 4, 5, 9, and 10) shall authorize Nexstar to undertake debt service and repayment activities necessary to comply with Nexstar’s financing obligations, including customary cash management, intercompany transfers, refinancing activities, collateral integrity, and guarantee obligations. This includes allowing TEGNA access to working capital and intercompany financing and cash management arrangements necessary for the combined company to repay its debt, as well as completing the required post-closing security completion process and avoiding default under Nexstar’s debt instruments. Corporate Governance and Operations Control: The TRO (paragraphs 1, 2, 3, 4, and 5) shall authorize Nexstar to take reasonable steps necessary to maintain TEGNA’s day-to-day operations, including approving routine financial transactions, such as wire transfers for regular course payments, without violating the TRO’s prohibitions on “influence.” Distribution Agreements and Retransmissions: The TRO (paragraphs 1, 2, 3, 4, and 5) shall permit necessary consultations related to the continued administration of existing retransmission agreements, the processing of payments, or the performance of expiring agreements and commitments under the FCC Order, and will not require the rollback or invalidation of pre-closing contractual provisions that occurred at closing. Corporate Governance Structure and Officer Powers: The TRO (Sections 1, 2, 4 and 6) shall authorize Nexstar to take any steps necessary to establish a functional governance structure for TEGNA, including the appointment or reappointment of officers, to the extent necessary to enable TEGNA to carry out the TRO. Nexstar’s enactment and implementation of Sarbanes-Oxley requirements, including the approval of contracts, approval of expenditures, and establishment of thresholds for interim operating terms and other financial covenants applicable to independent management of the business prior to closure, shall not be considered “influence.” Financing and Reporting Obligations: The TRO (paragraphs 1, 2, 3, 4, and 5) shall authorize Nexstar to take all reasonable steps to satisfy all obligations required under the Debt Instrument, SEC reporting requirements, or refinancing transaction, including coordinating with TEGNA personnel as necessary. This includes permitting Nexstar to complete required SEC and debt agreement reporting for the combined company within applicable deadlines, and working with TEGNA personnel to provide oversight by Nexstar management of the accuracy of TEGNA financial statements, including compliance with internal controls and procedures. Administrative Authority and “Ordinary Course” Operations: The TRO (paragraphs 1, 2, 4, and 6) shall authorize Nexstar to take such steps as are necessary to ensure the continued operations of TEGNA, including the appointment of officers, contract administration, and responding to third party requests. Corporate Governance and Officer Authority: The TRO (Section 1, Section 2, Section 3, and Section 4) shall authorize Nexstar to appoint or reappoint TEGNA officers as necessary for TEGNA to exercise independent decision-making authority with respect to retransmission matters. Employee Compensation and Employee Determinations: The TRO (paragraphs 1, 2, 3, 4, and 5) shall authorize TEGNA to the extent necessary to proceed with existing regular compensation and employee actions, including performance-based pay adjustments and related pay actions planned prior to the transaction. Interim Operating Terms: To provide appropriate guardrails for TEGNA’s operations in the coming days and to limit the ability of its subsidiaries to make financial commitments beyond their normal obligations, interim operating terms set forth in the Merger Agreement (Biard Decl. Ex. C) shall govern what actions TEGNA may take without the input or approval of Nexstar.
