Nexstar purchasing Channel 8, but will they keep it?

December 3, 2018

Nexstar purchasing Channel 8, but will they keep it?

CLEVELAND, Ohio – Cleveland Fox affiliate WJW Channel 8 is one of 42 Tribune Media stations that the Nexstar Media Group is purchasing in a deal valued at $6.4 billion. If approved by government regulatory agencies, the acquisition announced Monday will make the Texas-based Nexstar the country’s largest owner of TV stations.

Nexstar, which has gradually built a media empire by purchasing small groups of stations, made a big statement by ponying up $4.1 billion in cash to buy the Chicago-based Tribune Media Group stations. Tribune has owned Channel 8 since 2013.

The $6.4 billion figure includes the assumption of Tribune Media debt. The deal will bring Nexstar’s total to 216 stations in 118 markets, reaching 39 percent of U.S. television households. It also will give Nexstar stations in eight of the nation’s top-10 TV markets, including New York, Los Angeles and Chicago.

But Nexstar still is a long way off from having the keys to the much-bought-and-sold Channel 8. The deal is so big, it will take many months to be finalized.

Although already approved by the boards of both companies, the purchase needs to be subjected to complex and rigorous examination by the Federal Communications Commission. And this is where the plot easily could thicken regarding Channel 8.

To win FCC approval, Nexstar will need to sell several stations in markets where they now will have multiple ownership. Because Tribune owned many Fox affiliate stations, Nexstar now will own many Fox affiliate stations, and the Fox Television Stations group has made no secret that it will make a strong bid for seven of those stations: KCPQ in Seattle; WSFL in Miami; KDVR in Denver; KTXL in Sacramento, California; KSWB in San Diego; KSTU in San Diego; and WJW.

So industry analysts are fully expecting Fox Television to pressure Nexstar to sell those seven stations. Sources familiar with ongoing plans and negotiations still expect Fox Television Stations, which once owned Channel 8, to again be in possession of the Cleveland station, possibly by the end of next year or early 2020.

Why would Nexstar be inclined to accept a Fox offer? Well, Fox does have an effective bargaining chip.

It has been widely reported that Fox, wanting leverage for purchasing these stations, only made one-year affiliation deals with them. Affiliation deals with local stations typically run for five years or longer, so this certainly got the industry’s attention.

This means that Fox could threaten to pull the affiliations, suggesting it would be wiser to sell the stations to, you guessed it, Fox.

But it’s a volatile industry and anything can happen, as recent events have so forcefully demonstrated.

Nexstar, after all, is trying to succeed where the Maryland-based Sinclair Broadcast Group failed so spectacularly. Sinclair announced in May 2017 that it would be purchasing the Tribune stations for $3.9 billion. Approval of the purchase was expected no later than February, but the process stalled at the FCC, despite the endorsement and urging of President Donald Trump.

Some of the delays undoubtedly were caused by what became an increasingly contentious debate on the merits of the sale. Opponents of the sale argued that Sinclair forces local stations to air must-run content with a conservative, pro-Trump bias.

In what was widely viewed as a move to win FCC approval, Sinclair executives announced in May that they would be selling 23 stations in 18 markets. The plan filed as additional paperwork to the FCC called for Sinclair to sell stations in such markets as Dallas, Houston, Seattle and Salt Lake City.

The 23 stations to be sold included 14 of the 43 Tribune stations. Seven of those stations, including Channel 8, were to be sold to Fox. The acquisition would have increased Fox Television Stations’ presence to 19 of the top-20 television markets in the United States.

And that’s where things stood, shakily, until, suddenly and unexpectedly, everything collapsed.

Catching most industry watchers and President Trump off-guard in July, the FCC unanimously ruled not to approve the merger. The FCC alleged that Sinclair had misled the agency, referring the case to an administrative law judge.

Nexstar is expected to have a better fix on how to win FCC approval. If so, the acquisition should be approved in the third quarter of 2019.

“Nexstar has long viewed the acquisition of Tribune Media as a strategically, financially and operationally compelling opportunity that brings immediate value to shareholders of both companies,” Perry Sook, Nexstar’s chairman, president and CEO, said in a statement released Monday by the company. “We have thoughtfully structured the transaction in a manner that positions the combined entity to better compete in today’s rapidly transforming industry landscape and better serve the local communities, consumers and businesses where we operate.”

No television station in the Cleveland market has been bought and sold more than Channel 8, which signed on the air in December 1949. Storer Broadcasting, which owned the then-CBS affiliate since 1954, was bought out by Kohlberg Kravis Roberts in 1985. KKR sold it to Gillett Communications in 1987, with SCI Television spun off to take over the stations following a Gillett bankruptcy.

New World Communications purchased it in 1993. Fox bought New World, and Channel 8, in 1997, selling the Cleveland station to Local TV in 2008. Local TV sold it to Tribune in 2013.

Now Nexstar looks to be holding the keys, but for how long?

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