Shares of Nexstar Media Group opened sharply lower on Monday, sliding roughly 9% after a federal judge ordered the broadcaster to suspend its merger integration with Tegna Inc. The decision follows a request from DirecTV and a group of state attorneys general, led by California, who are challenging the transaction on antitrust grounds.
US District Judge Troy L. Nunley in Sacramento issued a 24-page order granting DirecTV’s request to pause the deal, which Nexstar and Tegna had closed last week. In the order, Nunley directed the companies to stop any further actions to combine their operations while the lawsuit proceeds through the courts.
Nunley wrote that the defendants "do not contest this merger will increase Nexstar’s bargaining leverage to extract higher fees." The judge said he found persuasive DirecTV’s contention that, despite the defendants’ argument that streaming and 'cord-cutting' will exert downward pressure on retransmission rates, Nexstar’s CEO Perry Nook recently told investors the opposite. The reference concerns retransmission fees - the payments local broadcasters charge cable and pay-TV providers for the right to carry their programming, which can ultimately result in higher consumer bills.
The court set a hearing for April 7 to consider whether the pause should remain in effect while the case moves toward a full trial. Until that hearing and any subsequent rulings, the companies have been ordered to refrain from advancing merger integration steps identified in the court’s directive.
The litigation represents a coordinated challenge by DirecTV and a coalition of state attorneys general to the transaction on antitrust grounds. Nunley’s order and the upcoming hearing leave the future of the merger uncertain as the legal process unfolds.
Market reaction
Investors reacted quickly to the court’s order, pushing Nexstar shares down by about 9% on Monday as the pause raises immediate questions about the timing and viability of the combined company's strategic plans.
What happens next
The April 7 hearing will determine whether the pause remains while the case proceeds to full trial. Pending further court rulings, the companies must halt further efforts to integrate their operations as specified by the judge.