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Local TV station giant Tegna, led by CEO Dave Lougee, got a boost from midterm political ad spending as the company posted record second-quarter revenues ahead of the company being bought up by two private equity firms.
Political revenue hit a second-quarter record of $50.8 million, up 53 percent from 2018, the last non-presidential election year. That performance also followed Tegna acquiring TV stations divested by Gray, Dispatch, Nexstar and Tribune in 2019.
The benefit of political advertising lifted overall revenue up 7 percent to a second-quarter record of $785 million, compared to 2021, even as the latest quarterly performance missed on a Wall Street analyst forecast of $800.8 million in total revenue.
At the same time, Wells Fargo analyst Steven Cahall said the pending takeover by private equity firms Standard General and Apollo Global Management leaves revenue estimates “a bit more stale given the company isn’t doing quarterly calls or updating investors.”
Subscription revenues rose 3.7 percent to $389 million, driven by rate increases and partially offset by subscriber declines. That offset advertising and marketing services revenue falling 1.7 percent to $335.2 million in the second quarter, due to softness in certain advertising categories, especially auto.
Net income at Tegna rose 23.5 percent to $131.9 million, or 59 cents per share. The company reiterated that a deal to be acquired by private equity firms Standard General and Apollo Global Management for $24 per share will be completed in the second half of 2022, pending approvals.
Wells Fargo’s Cahall cautioned that political scrutiny in Washington, D.C., had cast a shadow over the deal for Tegna, which the analyst added would likely be completed once it complied with regulatory requirements. “Of late, our conversations suggest there is some concern by investors that the Democrat-chaired FCC is less favorable to broadcast M&A. The comment period for this transaction seems lengthier, the role of Apollo as a financier may be causing the FCC to take additional time/consideration,” Cahall wrote in an Aug. 8 investors note.
The takeover deal gives the TV station owner an equity value of $5.4 billion and an enterprise value of around $8.6 billion, including the assumption of debt. Tegna owns 64 local TV stations in 51 markets and is the largest independent owner of NBC affiliates.
The company was formed in 2015 when Gannett split itself in two, spinning out its TV station business as Tegna, while retaining its legacy newspaper business.
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