The pending sale of a majority stake in Cox Media Group’s radio stations will take more than just a standard review at the Federal Communications Commission. It’s going to also take a foreign ownership analysis. That’s because buyer Apollo Global Management has asked the FCC for permission to exceed the 25% cap on foreign ownership to account for how the agency views the private equity firm.
In a $500 million deal announced last month, Apollo seeks to buy 50 radio stations from Cox Media Group across 11 markets including Atlanta, Miami, Houston, Tampa, Jacksonville, San Antonio, Tulsa, and Nassau-Suffolk, NY. The deal also includes Cox’s national TV rep firm CoxReps and Cox’s Washington, D.C. news bureau operations. Apollo previously struck a $3.1 billion deal to buy Cox’s television station group, including the radio-TV-newspaper combination in Dayton, OH.
Even as Apollo takes control, it won’t own the company outright. It will hold a 77% controlling interest while Cox Enterprises will retain a 23% minority stake in the broadcast company and it will have the right to name one board member. In order to comply with FCC ownership limits, two stations—alternative “97X” WSUN in Tampa and CHR “Power 95.3” WPYO in Orlando—will be placed in the Elliot Evers-run CXR Stations Trust for sale.
In a petition filed with the FCC, Apollo says that although the firm’s current foreign ownership is below the 25% threshold, the Delaware-based company is treated as a foreign-controlled entity That’s because under the Commission’s foreign ownership analysis, the voting interests of its U.S. owners are held through a Cayman Islands entity. So it’s asking the FCC to exceed the 25% cap, arguing Apollo is not only based in the States but it’s controlled by three U.S. citizens: Scott Kleinman, John Suydam, and David Sambur. It also tells the FCC that Cox will benefit from the financial, strategic, and management expertise that Apollo will bring to the company. The waiver, it adds, will also allow Apollo the flexibility to raise capital offshore to pump into the Cox assets.
The response from the Media Bureau is a definitive maybe. While it didn’t reject the request outright, the Bureau has opened a docket on the proposal with an aggressive timeline. It gives anyone opposed until August 12 to file a petition to deny. Comments on such a petition would then need to be turned in by August 22 with a reply to those due by August 29.
If the FCC goes along with the proposal, Cox Radio could become the third biggest group with permission to increase its foreign ownership stake beyond the long established 25% cap. The FCC is already considering a request filed by Univision Radio to raise its foreign ownership cap to 70% in order to allow Univision’s Mexico-based subsidiary Notivision to acquire a 21% stake in the 58-station radio unit.
Cumulus Media also has a pending application to boost its foreign ownership beyond the 25% cap in July 2018 to become as much as 100% foreign-controlled. The move is, in large part, an extension of its bankruptcy reorganization plan.
Long prohibited, the FCC has been slowly opening the door to increasing foreign ownership levels. The Commission in 2016 approved a move to streamline the process and standardize the review procedure for deals that proposed going past the 25% foreign ownership benchmark—saying it would be open to as much as 100% control by a foreign entity. But the Commission also said it would review each deal on a case-by-case basis.