A deal to merge the nation’s largest newspaper company with the second-largest could be in jeopardy due to an unexpected regulatory glitch, The Post has learned.
The Federal Communications Commission held a meeting with private equity firm Apollo Global Management this week to ask questions about its agreement to finance New Media Investment’s planned purchase of Gannett Co., the publisher of USA Today, sources said. New Media’s Gatehouse Media owns nearly 700 papers across 39 states.
The FCC is concerned that the $1.8 billion loan Apollo is providing to finance the merger could violate its duopoly laws, sources said.
That’s because Apollo also has a deal planned to buy 13 television stations owned by broadcast company Cox Enterprises for $3 billion. And while Gatehouse and Gannett are newspaper publishers and Apollo is buying TV stations from Cox, the FCC has rules that stop common ownership of a daily print newspaper and a TV station in the same market.
The FCC’s rules restricting overlapping ownership of a TV station and newspaper were widely believed to be dead at the time Apollo agreed to fund New Media’s plan to combine Gannett, the nation’s largest newspaper company, with Gatehouse.
But the old duopoly rules came back to life in September — thanks to a ruling from a federal appeals court in Philadelphia that reinstated them.
The Gatehouse/Gannett merger cannot survive without financing. And if Apollo is forced to choose, it’s expected to buy the TV stations and drop the newspaper deal, sources said.
Of course, the FCC could still grant Apollo the right to make both investments. When the private equity company run by Leon Black met with the FCC earlier this week, it told the regulator that the money for the two separate deals were coming out of different funds and serving different investors, sources said.
Apollo also argued that the Gatehouse loan represented a small enough portion of the value of the combined publisher to avoid ownership under FCC guidelines.
The FCC staff seemed satisfied with the answers, said a source who wants the deal cleared. But until the regulator rules on the issue, it could cause problems for the merger — especially ahead of a planned Nov. 14 vote by Gannett shareholders.
“There is not going to be a shareholder vote if you don’t have certainty to close,” a source with direct knowledge of the deal told The Post. “I don’t see it happening this year,” the second source said.
“Both transactions fully comply with FCC rules,” an Apollo spokesman said. The FCC not did not return calls.
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