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%).


19 thoughts on “Tegna (TGNA) – Merger Arbitrage – 45% Upside”

  1. Update:
    – 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. 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. 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.

  4. TGNA/Standard General merger update: Last week, the acquisition received no objections from a committee assisting the FCC in its review of telecom license applications from foreign-owned entities. Subsequently, on November 22 the companies agreed to extend the transaction closing date from Nov’22 to Feb’23. As part of the merger agreement, TGNA shareholders will now be entitled to a $0.05/share monthly ticking fee. Spread to the buyer consortium’s offer stands at 23% (assuming closing in Feb’23).

    • Hi Ilja, what’s your best guess as to the probability of this deal falling apart? I still don’t understand why the spread is so wide (IRR in the next few months…from now-Feb2023 seems very large provided the deal closes…and it would go to Delaware Chancery Court of the acquirer attempted to back out now, right?).

      • I guess investors are just generally uncomfortable with anything that’s touched by regulatory uncertainty at the moment. Many of TGNA’s peers have also traded down sharply since Sep’21 – SBGI (-32%), GTN (-48%) and SSP (-11%), so the potential downside is considerable. However, I agree that the current implied probability of closing seems too low. History of similar mergers suggests TGNA deal should go through. The combined company would not violate FCC’s station coverage threshold, albeit would get very close to it (39% of US households). There are concerns around SG pushing for higher retransmission fees after completing the merger, however, historically FCC’s used to stay away from interfering in private retransmission agreement negotiations. SG’s track record in providing local news coverage/increasing newsroom staff seems to be decent, so the opposition on this front will probably be weak as well. Both sides recently agreed to a closing date extension, so seems unlikely the buyer would walk away now.

      • I did 3/17/22 $20 – $22 at $0.50 net debit. Got that filled at open but put in another and haven’t gotten it filled yet though. So maybe spoke to soon.

  5. It does seem strange that when news is released making this deal more likely (e.g., TGNA’s press release & SEC filing about the committee for FCC), neither the share price increased nor the volume increased. This is in such contrast to TWTR several months ago in which any tiny (positive or negative) release of news would dramatically impact TWTR’s share price & volume.

    TGNA’s 4Q2022 earnings to be announced in Feb2023 should be good, because of the political campaign spending in Oct-Nov2022. It seems like the debt financing is solid. And no wavering from either party announced in the press or filings.

    My best guess is <10% probability of this deal falling apart. Even if the share price were to decline -50% (i.e., -$10) on this bad news, the trade still has an excellent NPV given the $5 spread currently (=$24 per share deal price or slightly more – $19.40 per share currently).

  6. FYI: On February 21, 2023, the Company elected, pursuant to the terms of the Merger Agreement, to extend the Outside Date (as defined in the Merger Agreement) from 5:00 p.m. Eastern time on February 22, 2023 to 5:00 p.m. Eastern time on May 22, 2023

      • Not yet, however, there is a strong possibility that the deal will fall through. SG has strongly criticized regulator’s decision, yet also hinted that if the case goes to court, the deal will effectively get terminated. A month has passed since then without any updates. Given where TGNA sits today, the market seems to have given up on this situation.

        From SG’s managing partner Soo Kim:

        “A decision delayed is a decision denied. Our proposed transaction is consistent with all FCC regulations and precedents. It is bolstered by a voluntary commitment to invest in local news, preserve newsroom jobs, and address purported concerns related to consumer pricing. But rather than rule on the transaction’s merits, as the law requires, the Media Bureau is attempting to scuttle the deal by ordering a wholly unnecessary hearing process, that if left standing by the Commission, would kill the deal.”


  7. Anyone still holding this with any insight they would like to share? It seems very cheap with great capital allocation but that’s been the story for a lot stocks over the last decade which haven’t really performed.

    Chris DeMuth (Sifting the World) still has it as a ‘current holding’ but he hasn’t mentioned it via that sub or on his monthly state of the markets on YAV podcast for a long time unfortunately.

    So, not really sure if I should eat a loss and move on given the merger didn’t happen or hold given quantitative attributes.


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