Even before the U.S. Court of Appeals for the D.C. Circuit denied Standard General’s petition to force the FCC to vote on its proposed $8.6 billion acquisition of Tegna, company founder Soo Kim knew his last-ditch legal maneuvers were a long shot.
Nevertheless, Kim seemed disappointed, frustrated and chagrined that the deal appears likely to die when the financing he assembled expires on May 22.
He’s disappointed because more than two years worth of effort and millions of dollars have gone into the transaction. Kim is frustrated, he says, because during the long renewal process, no one told him what defects in his application to own the Tegna stations needed to be repaired to achieve approvals. And he’s chagrined, the Standard General managing partner and chief investment officer says, because no one else and no other deal has been subjected to a similarly prolonged and mystifying process.
Kim told Broadcasting+Cable the deal would almost certainly die when the financing expires, with no extensions, no new money coming in to rescue the transaction.
In its ruling denying Standard General’s petition, the D.C. Circuit ruled that it did not demonstrate the FCC “has unreasonably delayed in acting on their applications.”
It is not clear if the government understood that Standard General’s financing was crucial and created a real deadline for completing the deal.
“The most valuable thing we have is the 15 months of financing I got,” Kim said. “That’s a long time. The FCC says, ‘Oh, don’t trouble me with your contract.’ Do you know how hard it is to get 15 months of committed financing now?”
Deal Can’t Be Rebuilt
Soo notes that the financing was obtained back when interest rates were approaching zero. Rates have since escalated, making Soo’s package super valuable. That financing can only be used to buy Tegna, and not some other company.
“It’s like a mortgage commitment. You can buy this house with a 2% mortgage, or you can buy something else out there with a 7% mortgage,” he said. “I have this amazing deal, which, by the way, I’m happy to share with the shareholders. I’m happy to share with the employees.”
By designating the transaction for a hearing by an administrative law judge just three months before that financing expires, the FCC’s Media Bureau effectively ended the deal.
The Media Bureau’s decision marked the first time ever a TV sale was designated for a hearing. It was also unusual because the bureau did not alert the commission it was taking that action.
Kim said that process was also unusual because Standard General was never what was wrong with its proposal or how to fix it.
“All we have ever asked is for our application to be treated like others,” Kim said.
Instead, the process was like something out of Animal House.
“Without pointing to what anyone's done wrong, we were put on ‘double secret probation,’ ” Kim said. “Double-secret probation isn’t a thing. When it comes to the ownership of the news voice in America this is very dangerous. This is not just about dollars and cents.”
He said this situation lets the government decide who is acceptable as a buyer of news. “That’s a scary thought,” he said.
In a letter to FCC chair Jessica Rosenworcel, Sen. Ted Cruz (R-Texas) and Rep. Cathy McMorris Rogers (R-Wash.) had many questions about the FCC’s handling of the Standard General-Tegna review, including a concern about accusations that the transaction was being blocked because Kim is a minority. “Even the appearance of impropriety harms the Commission’s reputation as a fair arbiter,” the letter said.
“If it could happen to us it could, happen to anybody,” Kim said.
“By saying that I'm not the right person, then you're effectively giving yourself the power to determine who is,” he added. “I think that control over news is something that U,S, citizens should not allow the government to have. Period.”
Kim said he worked hard and tried to cover all the bases in order to get the transaction approved.
Sometimes — against the advice of his lawyers and lobbyists, who expected the deal to be approved — Kim tried to address objections to the deal by unilaterally pledging not to cut newsroom jobs or raise retransmission rates. That didn’t work.
“I spent all of our time trying to talk sense into everyone involved, including reaching out to the Hill, the White House, saying ‘do you know what this regulatory agency is doing? They are taking something and making a real mash out of it and hurting an entire industry.”
Concerns Over Uncertainity
National Association of Broadcasters CEO Curtis LeGeyt at NAB Show in Las Vegas last week said his organization got involved in the Standard General-Tegna situation because uncertainty over the FCC approval process would make it more difficult for the broadcast industry to attract investments.
Kim added that while the NewsGuild-CWA, one of the unions objecting to the deal, claimed it was interested in preserving localism, its participation in politicizing a regulatory transfer is going to do more damage to those assets.
“My view of America is very positive,“ he said. “I wasn’t born here and I’m a proud immigrant and I love this country and I love it for all the opportunities it presents and everything that’s been given to me.”
The process threatens his faith in the American way, Kim said. “The worst thing it’s done is it almost has me questioning the fairness of the American system. This shouldn’t happen in America. It’s un-American,” Kim said.
Kim said that even after the deal ends, he’ll try to get answers to his questions about this process.
“I’m an industry veteran and I’m looking at this and asking why,” Kim said. “We will not stop until we figure out why.”
