Tegna (TGNA) – Merger Arbitrage – 45% Upside

Current Price: $13.73

Offer Price: $20

Upside: 45%

Expected Closing Date: TBD

Media report

The idea was shared by Brian.


This is a potential bidding war situation that is still in a rumour stage.

It is reported that TV broadcaster Tegna has received 3 acquisition proposals:

  • $20/share in cash ($8.5bn in total including debt) from private equity Apollo Management. Apparently Apollo has expressed interest to acquire the company twice in 2019 (February and June), but Tegna states that there was no "specific acquisition proposal" and no price was mentioned either.  In 2019 Apollo has also acquired certain TV stations  (valued at $1bn) from Nexstar Media and also Cox Media ($3bn).
  • $20/share in cash from Allen Media Group. There is a certain strategic rationale behind the offer and it is said that the group has secured the financing already.
  • $20/share in cash + stock (reportedly a smaller part) from regional TV station operator Gray Television. Gray owns over 140 stations in 93 markets and focuses mostly on smaller markets (reaches 24% of total households), while Tegna operates in 51 markets (mostly larger) and owns 62 stations (39% reach).

Rumours have started at about the beginning of March'20. TGNA has jumped up over 30% on the initial reports, but has declined significantly since then. Current upside to the rumoured price stands at 45%. So far, the company has not made any comments on the situation.

It seems that due to the regulatory restrictions (one operator can not own more than 1 out of 4 biggest stations in a regional media market + a total reach of the operator can not exceed 39% of the total US TV households), two out of three bidders would be required to make significant divestitures. The amount of mandatory divestments for Gray could reach $3bn, while a combination with Apollo would create an overlap in 6 major markets and divestments could go up to $1bn reportedly.


Proxy war

Interestingly, this potential bidding war comes at the time, when a major shareholder (9.7%) of Tegna - hedge fund Standard General is running a proxy war with the company to place 5 of their nominees on the company's board (12 seats) in the upcoming shareholders meeting (April-May). The campaign has started on the 15th January with SG letter to Tegna's shareholders saying that despite high quality of TGNA assets, the company has consistently underperformed its peers and the general market. Initially SG wanted to place 4 directors, but added one more by the end of Feb. Apparently Tegna's board has tried to reach a settlement with a pre-condition being that SG founding partner Soohyung Kim will not be put as nominee. SG has rejected this offer.

SG also seems to be supportive of the above mentioned acquisition proposals (quote): "We expect the TEGNA Board to conduct a full and fair evaluation of all available alternatives to maximize value, and we will continue to monitor this situation very closely".

The hedge fund has acquired the majority of its stake (9.2% of TGNA) in August'19 at about $13-$14/share price. As of the most recent 13F filing TGNA was the largest position in the fund's portfolio.

Besides SG the only other two major stakes are held by the index funds - Blackrock (11.8%) and Vanguard (11%).


  1. Ilja

    – Apparently Gray television has withdrawn its proposal, but a new bidder has emerged with an all cash proposal of the same size – The Najafi Companies and Trinity Broadcasting Network. So now the company has three all cash offers.
    – TGNA has not made any updates or comments on the offers so far.
    – Standard General is continuing the proxy war and is pushing the management to engage with the bidders.

  2. Zulu Investor

    Two of the potential bidders have ceased talks with Tegna. I believe Apollo and Grey Television are the two who have dropped out of bidding for Tegna, citing market conditions as a reason for withdrawing discussion.

  3. Ilja

    Standard General increased their ownership from 9.7% to 11.8% at $11.075/share and is urging the management to open books to the two remaining buyers – Byron Allen and Nafaji/Trinity.

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