TEGNA (TGNA) arb, mcap=$4.5bn, price $20.00 vs $20.07

TGNA arb pitch:
– Merger arbitrage.
– TGNA is to be acquired by Standard General at $24/share in cash.
– 20% spread currently due to the pending regulatory approval.
– In communication with FCC, the buyer has offered further commitments relating to retransmission consent agreements, staffing levels, and concerns that Standard General would collude with Apollo (AGM) and Cox Media Group.
– These developments indicate an increased likelihood to meet the regulator’s concerns and indicate that a deal is approaching approval.
– FCC’s decision is expected shortly.
– Downside well-protected at current levels.

TGNA valuation:
– 20% spread to the offer price.
– If the deal breaks, shares would temporarily trade down to $17/$18 level.
– Once M&A arb selling dissipates, TGNA is expected to trade closer to broadcast averages of 7x 2023/2024 EBITDA or near the $24 share deal price.

Exp. gain: 20% spread.

Full write-up (free guest account required):