Nexstar Stock Takes a Hit After Judge Halts Tegna Merger Plans
Nexstar Stock Plummets Following Merger Blockade
Nexstar Media Group’s stock dropped by 13% on Monday, a reaction to a federal judge’s decision to temporarily halt the company’s merger with Tegna. This unexpected decline erased nearly $850 million in market value, bringing shares down to $185.18—the lowest level since last November. Despite this setback, Nexstar’s stock had shown resilience over the past five years, rising by 94%.
The temporary restraining order was issued by U.S. District Judge Troy Nunley, who ruled in favor of DirecTV. The telecommunications giant claims the merger violates antitrust laws, a position supported by several states, including California and New York, that are also challenging the deal.
Valued at $6.2 billion, the Nexstar-Tegna merger is not only the largest local television merger to date but also challenges existing federal regulations. This deal allows the combined entity to own stations reaching approximately 80% of U.S. households, despite federal rules capping ownership at 39%.
A hearing has been scheduled for April 7, and investors are increasingly concerned that this ruling could result in a protracted review process. Following FCC approval, Nexstar quickly announced the merger’s closure, although the agency required the company to divest six stations as part of the agreement.
Blair Levin, a policy adviser with New Street Research, expressed in a client note that this ruling might leave Nexstar "stuck in deal purgatory for the next several years." He noted that if the case escalates to the U.S. Supreme Court, a hearing may not occur until the 2028-29 session, placing significant risk on Nexstar shareholders while Tegna investors have already realized their gains.
Judge Nunley asserted that DirecTV demonstrated "a likelihood of success on the merits" regarding its claims and that proceeding with the merger could inflict "irreparable harm." These factors are crucial in determining the issuance of temporary restraining orders, as courts assess potential harm against expected benefits from the merger.
FCC Chairman Brendan Carr has suggested that a larger Nexstar would counteract the influence national networks exert over local broadcasters. Carr has been vocal in his criticism of regulatory limitations in media, yet potential legal ramifications of his rhetoric could pose risks for future local television deals, especially considering the relaxation of ownership caps.
Levin indicated that this case could clarify the antitrust parameters governing broadcast consolidation, an issue of significant interest to investors navigating the landscape of potential media deals. He emphasized the need for investors to consider both the political dynamics at the FCC and the legal standards applied by the courts as they assess future opportunities.
