The pending $3.6 billion merger of Gray TV and Raycom, one of the two mega-deals poised to transform the local TV sector, is facing final regulatory conditions before it can proceed.
Antitrust regulators at the Department of Justice today ordered the companies to divest stations in nine markets in order to avoid a scenario where the combined company owns more than two of the CBS, ABC, NBC or Fox affiliates in any single market. Without shedding stations, the company would have more than two of the Big Four stations in Knoxville, TN; Toledo, Ohio; Waco-Temple-Bryan, Texas; Tallahassee, FL-Thomasville, GA; Augusta, GA; Odessa-Midland, Texas; Panama City, FL; Albany, GA; and Dothan, AL.
Securing such an advantage, the DOJ said, would drive up retransmission fees charged to pay-TV providers and, in turn, prices for consumers. In announcing the deal last summer, Gray said it would voluntarily divest stations in the same nine markets identified by the DOJ in order to stay under the FCC’s ownership rules. Under those rules, no single owner can control stations reaching more than 39% of U.S. households.
Nexstar last week announced plans to take over Tribune Media in a $4.1 billion transaction that will catapult it ahead of Sinclair Broadcast Group as the No. 1 owner of local stations in the U.S.
“Without the required divestitures, Gray’s merger with Raycom threatens serious competitive harm to cable subscribers and small businesses,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “I am pleased, however, that we have been able to reach a speedy and complete resolution of the Division’s concerns, thanks in part to the parties’ commitment to engage in good faith settlement talks from the outset of our investigation.”
The station divestitures must be handled so that the stations “will be used by the buyers as part of a viable, ongoing commercial television broadcasting business,” the DOJ said. That stipulation was ignored by Sinclair when it moved to close a deal to buy Tribune. Instead of giving its blessing, which most observers expected, the FCC flagged several of those divestitures as questionable and the transaction was soon abandoned.
Atlanta-based Gray owns 92 television stations in 56 local markets, of which 83 are Big Four affiliates. Montgomery, AL-based Raycom owns 51 television stations in 43 local markets, of which 45 are Big Four affiliates.