Cox Media Group will lose two FMs in Florida and a trio of Ohio newspapers will no longer publish seven days a week. Those are just some of the conditions being swallowed by private equity funds managed by affiliates of Apollo Global Management as they secure approval to buy a majority stake in CMG. In a multipronged pair of decisions, the Federal Communications Commission on Friday said the deal is in the public interest. It also cleared the new company to exceed the current 25% cap on foreign ownership.
Apollo’s move to take control of Cox emerged through a pair of deals beginning last spring. It filed a $3.1 billion deal in March to buy a buy a majority interest in CMG’s television stations, including the company's radio, newspaper and TV properties in Dayton, OH. The 14-station TV group includes stations in Atlanta, Orlando, Charlotte, Pittsburgh, Dayton, Seattle, Memphis, Jacksonville, Boston and Tulsa.
Apollo followed that up in June with a $500 million deal to buy 50 radio stations from Cox across 11 markets, including Atlanta, Miami, Houston, Tampa, Jacksonville, San Antonio, Tulsa, and Nassau-Suffolk, NY. The second deal also includes Cox’s national TV rep firm CoxReps and Cox’s Washington, D.C. news bureau operations.
But the deal was thrown a curve ball two months ago when a federal appeals court decision blocked several media ownership rule changes adopted by the FCC. That in part led Apollo and Cox to rework some elements of their deal and offer some other concessions to the FCC. Cox agreed to take a smaller share in Terrier Media, the company Apollo and Cox have created to operate the portfolio that includes radio, television and newspapers. And because the court overturned the FCC decision to end the decades-old prohibition on broadcast-newspaper cross-ownership, the companies offered to reduce the number of days the three Ohio newspapers publish so that they are no longer considered daily papers subject to the ban.
Giving Up Radio & TV Stations
But the court further complicated another pending portion of the deal-making. Affiliates of Apollo had earlier struck a $384 million deal to buy all the television stations owned by Northwest Broadcasting. But the court’s block of another FCC rule change, one that allowed one company to own two of the big four network television stations in the same market, meant the licenses for either WSYT-TV or WNYS-TV in Syracuse and for either KSWT-TV or KYMA-TV in Yuma, AZ will need to be turned in by Northwest rather than allowing Cox to own all four.
Meanwhile, the local radio limits also remain on the books and that meant in order to comply with those caps, 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. The FCC is giving Evers two years to sell the FMs. Beyond that, the FCC says Cox radio stations will benefit from having the financial, strategic, and management experience provided by Apollo. It points out Apollo has also committed to improving the radio stations’ infrastructure and growing their online presence in local markets.
The FCC’s approval is conditioned on transitioning from a seven days a week publication schedule to just three days for the Dayton Daily News, Journal-News and Springfield News-Sun, within 30 days of the deal closing. Cox Media Group President Kim Guthrie said last month the company is working on a strategy to return the papers to daily print publication as soon as possible.
The reworked deal structure means Cox has shrunk its voting interest in Terrier to 19.9%. That’s less than the 23% minority stake first announced in June in what is described as a business decision unrelated to the FCC issues. However, Cox’s ownership interest in Terrier would become non-attributable since it will no longer appoint an active member to Terrier’s board. Instead, whomever Cox puts in the board room will be considered “non-attributable observers,” rather than actually voting directors. The benefit of the reworked arrangement means no cross-ownership complications will exist in Atlanta, allowing Cox Enterprises to retain full control of the Atlanta Journal-Constitution newspaper.
Foreign Cap Waiver Approved
As part of a series of decisions, the Media Bureau has also cleared the new Apollo-controlled entity to exceed the 25% foreign ownership limits. The permission had been sought by Apollo to account for how the agency views the private equity firm. 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 in July it asked 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.
In a ten-page decision, Media Bureau Chief Michelle Carey said the FCC concluded that the public interest wouldn’t be served by preventing the company from blowing past the benchmark. “We find that a grant will provide the companies greater access to foreign capital and thereby contribute to the strengthening of the broadcast industry,” she said. Carey also noted that the executive branch review didn’t object to the proposal. – Frank Saxe