TEGNA Inc. (TGNA)

I got in at $12 yesterday.

So let's take a look at the situation:

4 Bidders are on the table:

Apollo Global
Trinity Broadcasting/PE Partner
Byron Allen
Gray

In the end, I am betting on Apollo to close the deal.

Apollo, Trinity and Gray have "synergy" potential from the acquisition in terms of cost reductions, mkt share penetration/fortification and revenues-crossover-expansion opportunities.

Byron, while in the same sector, does not share the same benefits (as the others since he doesn't have their level of station ownership) and can't justify a higher price other than to gain negotiating power with some of the cable companies. So he is effectively out unless he overpays.

That said, one can argue that Gray (145 stations) would stand to benefit the most as they would derive more cost savings than the others. But they had to go in with stock/cash mixed offer, of which the stock portion is essentially underwater and at risk to go further down.

Trinity has 35 stations, and has significant synergies as well, but they had to partner and share the economics with another PE and the much of the synergies will be loaded on debt which will fund the profits of the PE (and therefore share the economics with a third party).

Apollo, on the other hand, has an all cash offer on the table (which gives TGNA shareholders certainty) and could also reap synergy benefits (jut not as big as Gray). On top of that, Apollo is sitting on a lot of "dry powder" to deploy to help fund this transaction and Byron is not going to want to go into a bidding war against them. So I think Apollo is in the driver seat. Besides, Apollo, having the smallest footprint in terms of staions (i.e., 14 stations approximately), needs this deal to grow and will be willing to pay a premium as a result.

Given all that, I don't think anyone will pay much more for a variety of reasons(i.e., they know Gray's offer is too risky for TGNA shareholders in today's environment and they also know Byron doesn't have the same funding capabilities or synergies to justify a higher price). You will likely get a small pop to $22 - $25 but any higher would be unlikely.

With TGNA trading at $12.65 as of close on Tuesday, I think investors would have to give serious consideration to a $20+ offer (i.e., 60%+ premium) especially with their sector in the tank, a recession looming and advertising dollars drying up.

TGNA management right now is probably in the midst of Due Diligence Requests from the 4 Buyers, finalizing term sheets and developing presentations to give to the Board. There will be several "back and forths" between the board, the exec teams, and the buyers, and my guess is, if they are smart about it, they will have only have the terms of the deal done just before the next earnings call in a few weeks and release the press release only then. That way they can speak with some more clarity and transparency in the call and avoid a lot of unwanted and angry questions by shareholders.

There is no reason for them to release anything prior to that and I don't think you will see anything from them for a couple of weeks because they will use this time to negotiate and finish due diligence with all the buyers.

So sit back, and enjoy, and just hope that someone does not bungle up the auction process

The New York Post quoted a source claiming Lougee is raising anti-trust concerns. First of all, TEGNA could easily cut a deal that requires the buyer to pay a hefty failure fee (100 million perhaps) should the sale not go through for whatever reason including anti-trust concerns. It would also be very easy (and happens on most mergers/sales) to divest the stations that impede the sale. I am confident there are many many buyers for the Cox or TEGNA station in Atlanta. Not even sure why that came up. Nexstar was able to buy Tribune, which made it (according to Nexstar's boastful home page) "... America’s largest local television and media company with 199 full power stations (including partner stations) in 116 markets addressing more than 68% of U.S. television households and a growing digital media operation." Which brings me to the real question: why did that article come out? Who or what is trying to manipulate who or what? Is TEGNA trying to play hard to get in order to drive up price? Is SG trying to rile up the BoD/shareholders to make Lougee sit at the bargaining table? Is SG trying to find buyers in advance for the stations it wants to sell? That article was written with strange details (the atlanta situation which is so easily remedied, Kim's desire to oust Lougee) and history lessons (Kim's activist investor fight, TEGNA'S past efforts to sell the company).

There is no way the BoD and shareholders are going to be satisfied with a long term stock buyback.

I half expected to awaken this Sunday morning to find another anonymously sourced NY Post article about the buyout talks but that didn’t happen. I now think it’s pretty unlikely we’ll have a deal, and the market seemed to agree on Friday, with the stock down on high volume 1.5 times average and a closing price under $19. The holidays are a favorite time for companies to release unpleasant news because it’s a black hole in the news biz. Stock market will be closed Friday, Christmas eve day, and only the grunts will be working Thursday. Look for the company to issue the no-deal news around then. Or maybe they’ll wait and dump the news into the even bigger black hole between Christmas and New Year’s. Company operatives actually believe they’re being smart when they do things like that. My respect for Carl Icahn rises with each passing year. Disclosure: Long TGNA and will be happy to be wrong.

If you can't do the big deal, do a bunch of smaller ones.
By TVN Staff | December 15, 2021 | 9:04 p.m. ET.
Byron Allen’s Allen Media Broadcasting has signed a purchase agreement for its Fox affiliate WCOV Montgomery, Ala., from Woods Communications Corp. for $28.5 million in cash. This acquisition is expected to close in 2022.

Upon closing, the purchase will increase the number of TV stations owned and/or operated by Allen Media Broadcasting to 36 stations across 21 U.S. television markets. WCOV, in addition to carrying Fox, also offers Antenna TV and This TV on subchannels.

This is probably not a big bucks purchase, but it suggests that Bryon Allen may not be too concerned about financing the buyout of Tegna, else he wouldn't have made the purchase. Either that or he has reason to think his buyout of Tegna is already a done deal.

Byron Allen Acquires HBCUGo.TV, Streaming Service for Historically Black Colleges

https://www.nexttv.com/news/byron-allen-acquires-hbcugotv-streaming-service-for-historically-black-colleges

"We are seeking to change a minority of the Company’s Board of Directors (the “Board of Directors” or the “Board”). In 2019, we made a substantial investment in the Company, becoming one of TEGNA’s largest shareholders. We invested in TEGNA because of our conviction that TEGNA should be the premier pure play local affiliate broadcasting company. TEGNA has a leading portfolio of local affiliate television broadcasting stations and is the largest owner of Big 4 affiliates in the top 30 markets. Given the quality of its assets, we believed that TEGNA should be delivering best-in-class performance, and commensurate shareholder returns."

So, Byron Allen wants to buy the Denver Broncos football team. He has said so publicly (link below). Estimates peg the team's value at $3 to $4 billion. Given his apparent struggle to raise the money to buy Tegna, I think we can reasonably assume he can't buy both the company and the team. So I think Tegna shareholders can wave bye-bye to Byron despite a published report last week that he's still at the table in Tegna discussions. He wouldn't be publicly stating his hope to buy the team if he still had hope of buying Tegna. That means it's Apollo/SG or nobody -- unless another suitor emerges. I continue to believe the Tegna management and board don't want to sell and that a sale is no better than a 50-50 likelihood. I predict Tegna will find a way to scupper the deal. But, as a sufferinng long, I would be happy to be wrong.