Nexstar Halts Earnings Forecast Amid Legal Battle Over $6.2B Tegna Merger

Nexstar Media Group declined to provide a long-term earnings forecast to Wall Street on May 9, citing legal uncertainty surrounding its $6.2 billion acquisition of Tegna. The merger, which closed in March after receiving approval from the FCC and Department of Justice, has been placed on hold by a U.S. District judge following a challenge from DirecTV and a coalition of state attorneys general.

The judge issued a preliminary injunction, requiring Nexstar and Tegna to operate as separate entities until the case is resolved. “Given the current situation, operationally, we’re in a bit of an unprecedented place right now with the court order until we can be heard by the appellate court, go to trial or settle the case,” said Chief Financial Officer Lee Ann Gilha during the company’s first quarter earnings call.

Gilha added:

“Given the number of variables, I’m sure you’ll appreciate that for now, forward-looking guidance will be limited. We understand the market does not like uncertainty, so we’re going to do our best to keep you up to speed as much as we can, given the constraints placed upon us.”

Nexstar CEO Perry Sook confirmed the company has filed an appeal with the Ninth Circuit Court of Appeals as the case heads to trial in the U.S. District Court for the Eastern District of California. The company has retained attorney Beth Wilkinson, who previously served as the NFL’s lead trial counsel in the Sunday Ticket antitrust case.

Additionally, a separate challenge to the FCC’s approval of the merger is pending before the DC Circuit Court. The court denied a request for an emergency stay, citing lack of jurisdiction. Nexstar and the FCC have been directed to file responses to the petition by May 11.

Industry Consolidation and Antitrust Concerns

Despite ongoing industry consolidation, Sook argued that Nexstar remains at a disadvantage compared to big tech and national media companies. “We still operate with a fraction of their ubiquitous reach and financial resources,” he stated, emphasizing that the Tegna deal is critical to leveling the playing field.

“The Tegna deal is an important step in solidifying our future and our ability to continue providing these valuable services to local communities across the United States.”

Sook expressed confidence in the company’s legal position:

“We believe we will prevail on the merits of this case. We are confident in our arguments, expressed in detail in the FCC order approving the transaction, that a stronger, more financially resilient local broadcast industry is in the public’s best interest. We believe this is a fight worth having for us, for our industry and for the future of local journalism.”

Merger Terms and Market Reach

Under the original terms of the deal, Nexstar would have controlled 265 television stations across 44 states and the District of Columbia, reaching 80% of U.S. television households. The merger would have added Big-4 affiliate stations in Phoenix, Atlanta, Toledo, and Portland, as well as stations in nine of the top 10 markets.