FCC Expected to OK Gray/Raycom; DOJ Harder to Handicap
Gray Television’s buy of Raycom is widely expected to be approved by the FCC, industry officials told us, though recent DOJ actions make it harder to predict that agency’s reaction. Gray/Raycom is the leading edge of what could be a wave of dealmaking among TV groups, partially spurred by the demise of Sinclair/Tribune (see 1807230055), said Patrick Communications media broker Gregory Guy. The collapse of a combination that would have been vastly larger than any other broadcaster has “pumped a bunch of air into the industry,” Guy said. TV broadcasting is no longer a “two-horse race,” he said.
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The $3.6 billion deal would create the third largest U.S. broadcast group, with 133 TV stations in 92 markets, according to Gray. The deal includes Raycom’s nonbroadcast businesses Raycom Sports and automotive production company RTM Productions, and would spin off Community Newspaper Holdings and digital ad platform PureCars. Raycom CEO Pat La Platney and other executives would join Gray (see 1806250010). The combination’s ownership reach would be 17 percent under the UHF discount, and 24 percent without it, well under the 39 percent ownership cap.
Proposed divestitures in all nine overlap markets -- highlighted in a recent Gray release -- are expected to mean smooth sailing at the FCC and DOJ. But Justice pushback on Sinclair/Tribune and AT&T/Time Warner could indicate it's taking a tougher line with consolidations, said broadcast attorneys and industry officials. DOJ seems focused on how transactions will affect local TV advertising, said Fletcher Heald broadcast attorney Frank Jazzo. The Gray/Raycom divestitures make it unlikely DOJ will decide the transaction is anticompetitive, he said. At the FCC, lack of overlaps and similar absence of sharing arrangements will likely mean the deal is approved with few snags, industry lawyers said. Raycom, DOJ and the FCC didn’t comment.
Gray Executive Vice President Kevin Latek said the sale of stations in overlapping markets is intended to help the deal be approved quickly. “We want to be fast; time is money to us,” he said in an interview. Selling stations to get a quicker close is “the right trade-off,” he said. The transaction includes two existing top-four duopolies in Amarillo and Honolulu that will need to be approved under case-by-case basis rules. The duopolies should be allowed to continue because they make the stations involved viable, said Latek.
If Gray’s deal is approved quickly -- the company predicted Q4 -- it could be a road map for other transactions, legal experts said. Gray/Raycom’s approval would combine with Sinclair/Tribune’s dissolution to encourage less-aggressive negotiating with the FCC and DOJ, Guy said. It would show broadcasters they should be “patient” with the current pace at which the FCC is approaching deregulation, he said.
The absence of a giant Sinclair/Tribune combination means many more groups are looking to possible deals, Guy said, and that activity was exacerbated by Gray’s own divestitures hitting the market and speculation about Tribune’s eventual resting place, he said. Gray’s stations went to Tegna, Lockwood, Scripps and Marquee Broadcasting (see 1808210036).
Two large TV broadcasters consolidating into one isn’t good for the public interest, Free Press Policy Analyst Dana Floberg said. She didn’t identify any specific concerns with Gray/Raycom.
No petitions to deny were filed in docket 18-230 by Monday's deadline . The American Cable Association, Dish Network and NCTA criticized aspects. NCTA focused on criteria for top-four duopolies. Companies seeking approval of such combinations should be required “to demonstrate that the harms the Commission has recognized that are associated with common ownership are outweighed by real world benefits,” NCTA said. ACA urged the FCC to prevent Gray from activating after-acquired station clauses in stations it buys from Raycom that the company has committed to divesting. Dish said Gray hasn’t sufficiently demonstrated the public interest benefits.
That the MVPD entities filed comments instead of petitions to deny suggests they expect the deal to be approved, Latek said