Tegna plunges 25% after FCC orders hearing for Standard General sale (update)

Update 8:05pm: Adds statement from two FCC commissioners in opposition to the decision to move to a court hearing.

Tegna (NYSE:TGNA) dropped 25% in after hours trading after the Federal Communications Commission said that its planned $5.4 billion sale to Standard General has to go to an administrative law judge.

The hearing designation order focuses on "material concerns" related to how the transaction could "artificially raise prices for consumers and result in job losses," according a release from the FCC's Media Burea.

Tegna shares ticked up almost 1% in regular trading on Friday after a report that parties were generally more optimistic that the sale to Standard General would go through after an antitrust deadline had passed. The stock also jumped 6% on Wednesday after Standard General said it expected the deal would close in March or April subject to FCC approval and that all waiting periods for the federal antitrust regulator had expired.

Tegna didn't immediately respond to Seeking Alpha email request for comment. Tegna is trading around $16.30, levels it hasn't hit since more than two years ago. Tegna shares traded at $19.21 on Sept. 20, 2021, the day before it announced it had received acquisition proposals

“As part of the FCC’s mission, we are responsible for determining whether grant of the applications constituting this transaction serves the public interest," FCC Chairwoman Jessica Rosenworcel said in the statement. "That’s why we’re asking for closer review to ensure that this transaction does not anti-competitively raise prices or put jobs in local newsrooms at risk."

Standard General in December offered some remedies to the regulators including waiving some certain contractual rights in an effort to appease regulators at the FCC and the Dept. of Justice. Under the offer, Standard General would give cable companies and others the ability to negotiate retransmission consent agreements.

Sen. Elizabeth Warren (D-MA) last month urged the FCC to block the planned sale to Standard General due to competition concerns. Warren in the letter argued that the behavioral remedies "are historically ineffective and should provide no comfort that these Wall Street firms will not engage in anticompetitive practices after the deal is completed."

FCC Commissioners Brendan Carr and Nathan Simington issued a statement in opposition to the FCC's Media Bureau decision.

"Many of the nation’s local TV stations are trying to step up and expand their news gathering operation," Commissioners Carr and Simington said in the statement. "At this moment, the FCC should be working to encourage more of the investment necessary for these local broadcasters to innovate and thrive. It does the opposite today. After a protracted, nearly yearlong review, the Commission should be providing the parties with a decision on the merits—not an uncertain future.”

Last month Standard General's Soo Kim said he's optimistic that talks with regulators over the planned acquisition of Tegna (TGNA) were closer to the end than the beginning.

Tegna (TGNA) in late February of last year agreed to be sold to Standard General for $24/share.