Apollo Global Management and Sony’s proposed takeover of Paramount Global Inc. faces significant hurdles in passing through Democratic-led federal regulators amid antitrust concerns, the company learned.
Paramount, which closed exclusive merger talks with Skydance Media last Friday, owns the CBS network, its Hollywood studios and 28 local stations, including 17 CBS affiliates in markets such as New York, Chicago and Los Angeles. are doing.
Apollo teamed up with Sony to make a $26 billion all-cash bid for the Shari Redstone-controlled media conglomerate, but if the merger is approved by Paramount’s board, the FCC’s 39. faces an uphill battle to avoid the % cap. multiple sources told The Post.
Apollo owns TV channels that reach 11% of U.S. households through its stake in cable company Cox Media Group, media investment bankers told the Post.
Meanwhile, the banker said Paramount’s local stations accounted for 39 percent reach, putting the combined company’s total well above the FCC’s standards.
“Competitors may point out that Apollo’s ownership exceeds the national ownership limit of 39%,” said Adonis Hoffman, the agency’s senior legal advisor and chief of staff. “It’s a regulatory anachronism, but it’s still a reality at the FCC.” from 2013 to 2015, he told the Post.
However, Apollo takes advantage of an arcane FCC loophole called “.” “UHF discount” – Household proportion reduced by half According to a person familiar with the idea, broadcasters with channels in the UHF bandwidth will be counted, but not below the cap.
The investment banker said that under the discount program (passed in 1985, rescinded in 2016, and reinstated the following year by then-Republican FCC Chairman Ajit Pai), Paramount would have 25% of the %, and Cox says it remains at about 5%.
Mr. Pai pushed through the UHF discount in 2017, days before the right-wing Sinclair Broadcast Group announced a deal to buy Tribune Media, but without the discount the combined company would have been well over the cap.
However, multiple sources said there is a good chance the FCC will eliminate the UHF discount because Commissioner Jessica Rosenworcel, appointed by Joe Biden, believes it is outdated.
“The FCC created the discount system, so they can eliminate it,” said Benton Senior Fellow Gigi Thorne, a progressive Democrat whose nomination to the FCC fell through last year.
Son pointed out that there is precedent for reinstating caps to support mergers, so there is a possibility that caps could be lifted to block a deal.
“[Eliminating] “UHF discounts may be considered, particularly where there is a takeover proposal that relies on discounts to comply with ownership rules and submits the matter to the FCC,” said attorney David Oxenford. , said in a blog post that did not specifically mention Apollo. Offer.
If the FCC eliminates the UHF discount, it could ask Apollo or Paramount to sell some of its channels to get below the threshold, rather than blocking the merger entirely, the people said. That’s what it means.
The banker said there is currently overlap in three of the markets served by Paramount and Cox.
Apollo and Sony’s bid could also come under scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which may not be happy with a Japanese company owning CBS.
There are also concerns that the Federal Trade Commission will step in to prevent Sony, which has its own film division, from acquiring a second movie studio.
Hollywood mogul Jeffrey Katzenberg said Apollo faces “high hurdles” in gaining FCC approval for other reasons. The PE firm holds broadcast licenses for both television and radio, but has never held one for any of the three major national networks.
“Is the FCC going to allow a private equity firm to get that license? Think about it,” said Katzenberg, a key Biden adviser, at the Axios BFD talks in Los Angeles on Sunday night. ” he said at the event.
“This is a license to operate the number one broadcast network in America, and the FCC has the absolute right to approve it. Are you going to say that? I don’t know. That’s a high bar, especially in the current regulatory environment.”
Mark Rowan’s Apollo, which already had a potential merger with Standard General and station owner Tegna, was essentially killed off by Rosenworcel.
The company helped fund Standard General’s bid, but the FCC decided last year not to vote on the proposed merger, and the merger died.
Rosenworcel was uncomfortable with Apollo’s control over Tegna and Cox, the people said, even though Apollo had insisted it would be a passive investor in Tegna. He was also reluctant to allow private equity firms to gain such a large footprint in broadcast television, the people added.
standard general sued the FCC In March, the agency claimed it discriminated against Byron Allen, an African American, in its offer because it preferred him to own Tegna.
“The FCC does not appear to tolerate private equity media ownership, as evidenced by its recent disapproval and outright disdain for Standard General’s proposed acquisition of Tegna last year,” Hoffman said.
“When it comes to timing, the FCC has shown it really knows how to delay a deal. The 180-day merger shot clock is a guideline, not a rule, but it was ignored at the chairman’s will.” It does not bode well for easy or early approval of plans.”
Mr. Hoffman said the FCC Currently trying to force Nexstar Media Group The company was supposed to sell New York’s WPIX Channel 11 completely in a recent merger, but reportedly did not do so.
“This is at least a window into the current thinking of the FCC,” Hoffman said.
