Report: Nexstar, Byron Allen looking to buy ABC (updated)

Comes a day after a former Nexstar exec says it could happen 

[Editor’s Note: This story has been updated.]

News of a potential ABC sale picked up Thursday after Bloomberg reported The Walt Disney Co. was in talks for either Nexstar or Allen Media Group (led by Byron Allen) to purchase ABC and its owned eight stations, after a Deadline article was published a day earlier on comments made by a former Nexstar exec saying his company would be interested if the opportunity becomes available. 

Disney called the reports “unfounded” but said it was continuing to keep “strategic options” available. 

Thursday evening, Allen made a $10 billion bid for ABC, its eight stations, and its linear cable networks, excluding ESPN. 

In the Deadline article, Tom Carter, who is now senior advisor to company CEO Perry Sook and on Nexstar’s board of directors is suggesting just that as he thinks they could make a play for ABC’s eight owned-and-operated stations – though he didn’t say anything about the network itself.

Carter said the stations could be acquired with “little friction” and would give Nexstar duopolies in every market Disney has stations, including Chicago where Nexstar owns independent WGN-TV and owns 75 percent of The CW. “We think there could be some opportunities depending on how things fall out,” Carter said at an investor conference in New York Wednesday hosted by BofA Securities. Addressed in the remarks include Nexstar continuing to be a growth company and potential overlaps with ESPN when it comes to programming. 

In July, Disney CEO Bob Iger suggested he could sell “non-core” assets of Disney, including ABC, its owned stations, and its linear cable networks, with the exception of ESPN. Earlier this week, Disney and Charter ended their twelve-day impasse and agreed to allow its Spectrum-branded service to sell ESPN’s streaming apps at wholesale rates and to drop eight of its cable channels, including FXX and Freeform.
As for the 39 percent coverage cap on how many TV stations one can own, Carter isn’t concerned. “ABC’s portfolio of stations is modest. It’s only eight, largely in the top 10 markets. We’re in eight of the top 10 markets already with a CW station. We could buy a second station in that market and not increase our household footprint. There may be a few stations that would require divestiture of either a Nexstar station or an ABC station, but we could onboard those with relatively little friction.”

Toward the end of his presentation, Carter seemed to backtrack a bit saying it would be a bit difficult to pull all of this off. “I don’t know if there’s a deal to be done there,” he said. “I think they’ve got to be a bit clearer in their own thinking about how that goes. We can take direction but we’re not necessarily out there leaning into this stuff without a clear path.”

Originally split off from the NBC Radio as the “blue” network, ABC was formed in 1943 owned by Life Savers’ billionaire Edward Noble. ABC launched its TV network in 1948 with fourteen stations and merged with United Paramount Theaters in 1953, forcing the sale of CBS affiliate WBKB-TV to CBS itself (as ABC already owned WENR-Channel 7) while ABC took the WBKB call letters and talent and moved them to Channel 7 while WBKB calls changed to WBBM-TV and shifted from Channel 4 to Channel 2, also in 1953. Capital Cities purchased ABC in 1985 and was swallowed up by Disney in 1996 for $19 billion as the fin-syn rules expired. 

There are a LOT of issues if Nexstar buys ABC, despite the “little friction”. For one, the FCC prohibits duopolies between two of the top-four rated stations in a market. This means ABC 7 – usually the most-watched station in Chicago – and WGN-TV, who ranks third or fourth in the market and has the top local morning news show, would unlikely pair up given the potential for one company to control too much ad revenue in Chicago and opposition from those concerned the city could lose a major newsroom in the process. The same would equally apply to Los Angeles’ KABC-TV and Nexstar’s KTLA.

Also the FCC – now under Democratic control – could likely reject this deal and the Justice Department might also do so, unless there’s some major divestures (such as Fresno, where ABC owns a station and Nexstar owns two.) There is the “dual network” rule the FCC still has on the books, although the agency granted a waiver to Viacom so it could retain UPN after the company purchased CBS in 2000. However, if a Republican wins the White House next year and the party takes control of both houses of Congress in 2025, then all bets are off.

And there’s likely opposition from cable and satellite companies, with DirecTV (who lost Nexstar stations in a carriage dispute) suing Nexstar for using affiliates Mission and White Knight Broadcasting to get around the FCC’s ownership rules. DirecTV already filed a petition with the FCC against Mission/Nexstar denying their purchase of WADL-TV in Detroit, who became a CW affiliate earlier this month. Mission also owns WPIX New York where Nexstar operates the day-to-day operations of the station.

There’s going to be a lot of this kind of talk for sometime to come as the advent of streaming and the decline of linear is continuing to reshape the world of television.