“Television broadcast stocks are lower today on concern that a potential FCC loss in an ownership-limit case could tie up future deals or stop them in their tracks,” Bloomberg reports. “D.C. Circuit appeals court judges grilled the FCC today about an ownership rule change that’s needed for Sinclair to acquire Tribune Media. The national holdings limit rests at 39%, but that rule — the UHF discount — lets some companies count only part of their audience, skirting the threshold.”
Bloomberg Intelligence litigation analyst Matthew Schettenhelm is quoted in the story saying: “I’ve been to a lot of FCC arguments and this one was among the worst I’ve seen for the agency. It’s not a sure thing but I would be very surprised if the FCC prevails.”
Schettenhelm predicted that judges would rule against the UHF discount, which Bloomberg notes would “not only complicate the proposed Sinclair-Tribune deal, but also squeeze future M&A by leaving less room for broadcasters to buy more stations.”
Added Schettenhelm: “Without the discount there is a lot less room for acquisitions to occur because you have a bunch of companies that are pretty close to that 39% level. As long as that cap remains in place, the companies don’t have a lot of room to grow.”
The court is expected to decide before the end of September whether the agency properly enforced the UHF discount.