Item 8.01 Other Events.
As previously disclosed, on February 22, 2022, TEGNA Inc., a Delaware
corporation ("TEGNA" or the "Company"), entered into an Agreement and Plan of
Merger (as amended by Amendment No. 1 thereto on March 10, 2022, the "Merger
Agreement"), with Teton Parent Corp., a Delaware corporation ("Parent"), Teton
Merger Corp., a Delaware corporation and an indirect wholly owned subsidiary of
Parent ("Merger Sub"), and solely for purposes of certain provisions specified
therein, other subsidiaries of Parent, certain affiliates of Standard General
L.P., a Delaware limited partnership and CMG Media Corporation, a Delaware
corporation, and certain of its subsidiaries. Pursuant to the terms of the
Merger Agreement, subject to the terms and conditions set forth therein, Merger
Sub will be merged with and into TEGNA (the "Merger"), with TEGNA continuing as
the surviving corporation and as an indirect wholly owned subsidiary of Parent.
On April 13, 2022, TEGNA filed a definitive proxy statement with the Securities
and Exchange Commission (the "SEC") in connection with the Merger (the "Proxy
Statement").
As previously disclosed in the Proxy Statement, as of April 12, 2022, six
lawsuits had been filed by purported stockholders of TEGNA ("TEGNA
stockholders") in connection with the Merger. On March 28, 2022, a purported
TEGNA stockholder filed a lawsuit against TEGNA and the current members of the
Board of Directors alleging that the preliminary proxy statement filed by TEGNA
on March 25, 2022 in connection with the Merger contained alleged material
misstatements and/or omissions in violation of federal law. The lawsuit is
captioned Wang v. TEGNA Inc. et al., No. 1:22-cv-02513, and is pending in the
U.S. District Court for the Southern District of New York. On March 29, 2022,
another lawsuit was filed against the same defendants asserting similar claims.
The lawsuit is captioned O'Dell v. TEGNA Inc. et al., No. 1:22-cv-02547, and is
also pending in the U.S. District Court for the Southern District of New York.
On March 30, 2022, two additional lawsuits were filed against the same
defendants asserting similar claims; the first lawsuit is captioned Waterman v.
TEGNA Inc. et al., No. 1:22-cv-01789, and is pending in the U.S. District Court
for the Eastern District of New York; the second lawsuit is
captioned Landskroner v. TEGNA, Inc. et al., No. 1:22-cv-02611, and was pending
in the U.S. District Court for the Southern District of New York until it was
voluntarily dismissed on April 1, 2022. In addition, on March 31, 2022, a fifth
lawsuit was filed against the same defendants bringing similar claims. The
lawsuit is captioned Whitfield v. TEGNA Inc. et al., No. 2:22-cv-01247, and is
pending in the U.S. District Court for the Eastern District of Pennsylvania.
Finally, on April 7, 2022, another lawsuit was filed against the same
defendants, also asserting similar claims. The lawsuit is captioned Nutkis v.
TEGNA Inc. et al., No. 1:22-cv-02894, and is pending in the U.S. District Court
for the Southern District of New York.
Following the filing of the Proxy Statement with the SEC, as of May 9, 2022, one
additional lawsuit has been filed by a purported TEGNA stockholder in connection
with the Merger. On April 27, 2022, a lawsuit was filed against the same
defendants and asserting similar claims as in the complaints referenced above.
The lawsuit is captioned Jones v. TEGNA Inc. et al., No. 1:22-cv-03420, and is
pending in the U.S. District Court for the Southern District of New York.
In addition, as of May 9, 2022, four demand letters have been sent to TEGNA in
connection with the Merger, one on each of April 18, 2022, April 28, 2022,
May 3, 2022 and May 4, 2022. The demand letters were each sent on behalf of a
purported TEGNA stockholder, and each alleges similar deficiencies in the Proxy
Statement as those noted in the complaints referenced above.
TEGNA believes that the claims asserted in the actions described above are
without merit and that no additional disclosures were or are required under
applicable law. However, to moot the unmeritorious disclosure claims, to avoid
the risk of the actions described above delaying or adversely affecting the
Merger and to minimize the costs, risks and uncertainties inherent in
litigation, without admitting any liability or wrongdoing, TEGNA has determined
to voluntarily make the following supplemental disclosures to the Proxy
Statement as described in this Current Report on Form 8-K. Nothing in this
Current Report on Form 8-K shall be deemed an admission of the legal necessity
or materiality under applicable laws of any of the disclosures set forth herein.
To the contrary, TEGNA specifically denies all allegations in the actions
described above that any additional disclosure was or is required.
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Supplemental Disclosures to the Proxy Statement
The following disclosures in this Current Report on Form 8-K supplement the
disclosures contained in the Proxy Statement and should be read in conjunction
with the disclosures contained in the Proxy Statement, which in turn should be
read in its entirety. All page references are to the Proxy Statement and terms
used below, unless otherwise defined, shall have the meanings ascribed to such
terms in the Proxy Statement. For clarity, new text added to the Proxy Statement
is shown in bold, underlined text, and text deleted from the Proxy Statement is
shown in stricken-through text.
The section of the Proxy Statement entitled "Proposal 1: Adoption of the Merger
Agreement-Background of the Merger" is hereby amended and supplemented as
follows:
The last paragraph on page 28 of the Proxy Statement is hereby amended and
supplemented as follows:
Following various preliminary discussions over the prior year regarding the
exploration of possible transactions, including a possible combination of
certain assets, between representatives of TEGNA and Apollo, on February 24,
2020, TEGNA entered into a reciprocal non-disclosure agreement with an affiliate
of Apollo (the "Apollo NDA"), which contained a customary standstill
restriction, but also included an exception that allowed Apollo to submit
confidential proposals to the Chief Executive Officer or Chairman of the Board
of Directors. Thereafter, TEGNA and Apollo provided due diligence information to
each other.
The first full paragraph on page 29 of the Proxy Statement is hereby amended and
supplemented as follows:
On February 28, 2020, TEGNA entered into a non-disclosure agreement with Party A
(the "Party A NDA"), which contained a customary standstill restriction with a
customary "fall-away provision" that allowed Party A to submit confidential
proposals to the Board of Directors. The Party A NDA contained substantially
similar terms as the Apollo NDA. Thereafter, TEGNA provided non-public due
diligence information to Party A and engaged in further discussions with Party A
regarding a potential transaction.
The last paragraph on page 30 of the Proxy Statement is hereby amended and
restated in its entirety to read as follows:
At a virtual meeting of the Board of Directors held on October 27 and 28, 2020,
the Board of Directors discussed and reviewed, together with J.P. Morgan,
Greenhill and Wachtell Lipton, Apollo's proposal. Representatives of the
financial advisors reviewed with the Board of Directors a summary of the
financial projections for TEGNA prepared by management at the direction of the
Board of Directors to assist the Board of Directors in its review of a potential
transaction involving TEGNA. The forecasted financial information included
management's base case projections, as well as an optimistic sensitivity case
and a pessimistic sensitivity case that TEGNA management believed was important
to include given the heightened levels of uncertainty due to the COVID-19
pandemic. The Board of Directors discussed TEGNA's financial performance and
standalone plan and the assumptions underlying the different cases of
projections that management prepared, including in the context of the historical
and most recent revenue and EBITDA trends for TEGNA, economic recovery from
COVID-19, as well as industry changes and the regulatory environment. The
financial advisors also reviewed with the Board of Directors a summary of
preliminary valuation analyses, including an analysis based on the different
cases, and discussed with the Board of Directors Apollo's possible valuation
methodology and the possible rationale behind the timing of the Apollo proposal
and the proposed consideration. Also during this meeting, representatives of
Wachtell Lipton discussed with the Board of Directors its fiduciary duties under
Delaware law, including in connection with the Apollo proposal. Following
further discussion regarding possible responses to Apollo, whether or not to
approach other possible acquirers, the risk of leaks, regulatory considerations
and risks inherent in a transaction with Apollo and other parties, the
uncertainty surrounding the future of the media industry and the potential for
continuing consolidation in the broadcast industry, the Board of Directors then
authorized management to communicate to Apollo that the proposed consideration
was insufficient, but that TEGNA was willing to engage and possibly provide
additional due diligence materials to assist them in increasing the value of
their proposal. The Board of Directors also authorized management to reach out
to Party A and certain other potential counterparties to assess their its
interest in a potential transaction with TEGNA.
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The seventh paragraph on page 32 of the Proxy Statement is hereby amended and
supplemented as follows:
From the end of February to mid-March 2021, TEGNA's senior management engaged in
further discussions with representatives of Party B, and on March 12, 2021,
TEGNA entered into a non-disclosure agreement with Party B (the "Party B NDA"),
which included a customary standstill restricting Party B from taking certain
actions with respect to TEGNA and its securities, and also included a customary
"fall-away provision," as well as the ability of Party B to submit confidential
proposals to the Chief Executive Officer or Chairman of the Board of Directors.
Thereafter, TEGNA provided non-public due diligence information to Party B.
The fourth paragraph on page 33 of the Proxy Statement is hereby amended and
supplemented as follows:
On July 23, 2021, TEGNA entered into a non-disclosure agreement with Standard
General (the "Standard General NDA"), which included a customary standstill
restricting Standard General from taking certain actions with respect to TEGNA
and its securities that did not have any conditions other than the expiration of
the standstill pursuant to which the standstill would terminate, but that
permitted Standard General to make confidential proposals to the Board of
Directors. The Standard General NDA contained substantially similar terms as the
Party A NDA and the Party B NDA, other than with respect to the mutuality of the
NDA restrictions, the length of the standstill term and certain other terms.
The third paragraph on page 37 of the Proxy Statement is hereby amended and
restated in its entirety to read as follows:
On December 14, 2021, TEGNA's, Standard General's and Apollo's legal advisors
discussed various issues in the merger agreement and the other transaction
documents, including the regulatory efforts covenant, representations regarding
regulatory matters, the regulatory reverse termination fee and triggers for that
fee, flexibility for TEGNA to conduct its business prior to the closing,
including in connection with negotiations and entering into material contracts,
financing efforts and cooperation covenants, including a proposed the financing
"marketing period" length and start date, the definition of "Company Material
Adverse Effect" and exceptions, covenants regarding non-solicitation of
alternative proposals, closing conditions and termination rights and certain
other issues.
The fourth full paragraph on page 39 of the Proxy Statement is hereby amended
and supplemented as follows:
On January 14, 2022, the Board of Directors held a virtual meeting, which was
attended by TEGNA's management and financial and legal advisors. During the
meeting, Mr. Elias and Mr. Lougee provided the Board of Directors with an update
on the status of negotiations with Standard General, including the negotiations
regarding the merger consideration, the regulatory reverse termination fee
(including the proposal by Standard General to bifurcate the amount of this fee
if there was a material breach of the regulatory efforts covenant) and the
possibility of introducing a "ticking fee" concept (i.e., a prorated increase in
merger consideration if the merger did not close within a certain period of
time) to bridge the valuation gap and incentivize Standard General to more
expeditiously attempt to obtain regulatory approvals for the transaction, with
the quantum of the ticking fee subject to negotiation with Standard General.
Following discussions regarding these topics, Mr. Elias described to the Board
of Directors the recent outreach by Party B to representatives of J.P. Morgan.
Also, during this meeting, Mr. Lougee discussed with the Board of Directors
TEGNA's recent and expected financial performance and discussions with
distributors and provided a brief business and investor relations update.
The following paragraph is hereby added after the second full paragraph on page
40 of the Proxy Statement:
On January 26, 2022, a representative of Standard General informed a
representative of TEGNA that Standard General was contemplating including
additional non-voting preferred equity financing sources (other than Apollo) in
the financing for the transaction. Shortly thereafter, at the request of Apollo,
TEGNA permitted Standard General and Apollo to engage with funds managed by Ares
Management as non-voting preferred equity financing sources alongside Apollo.
TEGNA and Ares Management did not execute a separate non-disclosure agreement,
and instead Ares Management received confidential information as a
representative of Standard General under the Standard General NDA.
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The third full paragraph on page 40 of the Proxy Statement is hereby amended and
supplemented as follows:
On January 31, 2022, the Board of Directors held a virtual meeting during which
Mr. Elias and representatives of Wachtell Lipton provided the Board of Directors
with an update on the status of negotiations with Standard General and its
financing sources, noting that a summary of the current draft merger agreement
and the other transaction agreements had been provided to the Board of Directors
prior to the meeting. As part of this update, Mr. Elias again described to the
Board of Directors the terms that had been agreed with Standard General if the
transaction was ultimately approved by the Board of Directors, including
(i) that the amount of the merger consideration would be $24.00 per share,
(ii) the amount of the "ticking fee" of $0.05 per month for the period between
nine and 12 months following execution of definitive transaction documents (with
Mr. Elias noting that the amount of the "ticking fee" for months 12 through 15
remained subject to further negotiation), and (iii) the amount of the financing
and regulatory reverse termination fees. Mr. Elias summarized for the Board of
Directors the various work streams that were in process with respect to the
proposed transaction, including an update on Standard General's efforts to
obtain additional preferred equity financing sources and informed the Board of
Directors that funds managed by Ares Management could possibly become a
non-voting preferred equity financing source for the transaction. Mr. Elias also
discussed with the Board of Directors the potential timeline to reaching the end
of negotiations. Mr. Elias reported that TEGNA had not received any updates from
Party B. Mr. Lougee then described to the Board of Directors his discussions
with Deborah A. McDermott, the CEO of Standard Media, in which Mr. Lougee
provided an in-depth overview of TEGNA and discussed the communications plan for
TEGNA and Standard Media if a transaction were to be announced.
The section of the Proxy Statement entitled "Proposal 1: Adoption of the
Merger-Opinion of J.P. Morgan Securities LLC" is hereby amended and supplemented
as follows:
The fourth full paragraph on page 48 of the Proxy Statement, located under the
subheading "Public Trading Multiples," is hereby amended and supplemented as
follows:
These companies were selected, among other reasons, because they are publicly
traded companies with operations and businesses that, for the purposes of J.P.
Morgan's analysis, may be considered sufficiently similar to those of TEGNA
based on business sector participation in television broadcasting, operational
characteristics, including deriving a majority of their revenue from operation
of broadcast television affiliate stations, and financial metrics. None of the
selected companies reviewed is identical to TEGNA. Certain of these companies
may have characteristics that are materially different from those of TEGNA. The
analyses necessarily involve complex considerations and judgments concerning
differences in financial and operational characteristics of the companies
involved and other factors that could affect the companies differently than they
would affect TEGNA.
The table on page 48 of the Proxy Statement, located under the subheading
"Public Trading Multiples," is hereby amended and supplemented as follows:
Adj. FV/EBITDA (post-SBC) Adj. EV/LFCF
Avg '21A - '22E Avg '21A -'22E
Company Unaffected(1) 6.8x 5.9x
Selected Companies 7.8x ~ 8.4x 4.4x~5.9x
Nexstar Media Group, Inc. 7.8x 5.6x
E.W. Scripps Company 8.4x 5.9x
Gray Television, Inc. 7.9x 4.4x
The second full paragraph and the table on page 49 of the Proxy Statement,
located under the subheading "Selected Transactions Analysis," are hereby
amended and supplemented as follows:
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Using publicly available information, J.P. Morgan examined selected transactions
involving companies engaged in businesses which J.P. Morgan judged to be
sufficiently analogous to the business of TEGNA (or aspects thereof) based on
J.P. Morgan's experience and familiarity with the television broadcasting
industry in which TEGNA operates. For each of the selected transactions., J.P.
Morgan calculated the firm value of the target company in such transaction as a
multiple of the Last Eight Quarter Average ("L8QA") Adj. EBITDA (post-SBC),
which J.P. Morgan calculates as the sum of the target company's Adj. EBITDA for
the eight most recent quarters ending immediately prior to the announcement
date, divided by two, and refers to as FV/L8QA Adj. EBITDA (post-SBC). The
FV/L8QA Adj. EBITDA (post-SBC) ranged from 7.6x to 12.4x. The transactions
considered were as follows:
Month/Year
Announced Acquirer Target FV/L8QA Adj. EBITDA (post-SBC)
February 2013 Sinclair Broadcast Barrington
Group, Inc. Broadcasting Group,
LLC
(18 TV stations) 7.8x
April 2013 Sinclair Broadcast Fisher Communications
Group, Inc. 12.4x
June 2013 Gannett Co., Inc. Belo Corporation 9.4x
June 2013 Media General, Inc. Young Broadcasting,
LLC 7.8x
July 2013 Tribune Media Company Local TV Holdings, LLC 9.4x
July 2013 Sinclair Broadcast The Allbritton
Group, Inc. Communications Company
(7 TV stations) 10.7x
December 2013 Meredith Corporation Gannett Co., Inc. 10.0x
August 2014 Media General, Inc. LIN Media LLC 11.2x
January 2016 Nexstar Media Group, Media General, Inc.
Inc. 9.9x
April 2017 Sinclair Broadcast Bonten Media Group
Group, Inc. Holdings, Inc. N/A
May 2017 Sinclair Broadcast Tribune Media Company
Group, Inc. 10.0x
December 2017 TEGNA Inc. KFMB-AM-FM-TV N/A
June 2018 Gray Television, Inc. Raycom Media, Inc. 10.0x
October 2018 E.W. Scripps Company Cordillera
Communications, LLC
(15 TV stations) 9.5x
December 2018 Nexstar Media Group, Tribune Media Company
Inc. 9.0x
February 2019 Apollo Management Cox Media Company 10.0x
March 2019 TEGNA Inc. Nexstar Media Group,
Inc./Tribune Media
Company (11 TV
stations) N/A
-6-
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Month/Year FV/L8QA Adj. EBITDA
Announced Acquirer Target (post-SBC)
March 2019 E.W. Scripps Company Nexstar Media Group,
Inc./Tribune Media
Company
(8 TV stations) N/A
June 2019 TEGNA Inc. Dispatch Broadcast
Group (TV and radio
stations) N/A
September 2020 E.W. Scripps Company ION Media 8.2x
February 2021 Gray Television, Inc. Quincy Media, Inc. ~8.3x
April 2021 Allen Media Group, LLC Gray Television, Inc.
(10 TV stations) 7.6x
May 2021 Gray Television, Inc. Meredith Corporation's
Local Media Group 9.7x
The section of the Proxy Statement entitled "Proposal 1: Adoption of the Merger
Agreement-Opinion of Greenhill & Co., LLC" is hereby amended and supplemented as
follows:
The third full paragraph on page 56 of the Proxy Statement, located under the
subheading "Summary of Greenhill's Financial Analysis-Discounted Cash Flow
Analysis," is hereby amended and supplemented as follows:
Greenhill also calculated a terminal value for TEGNA at the end of this period
by applying a range of exit multiples of 7.0x to 8.0x to the average of the
projected EBITDA for 2022 and 2023 using these same sets of Forecasts. Greenhill
selected this range of exit multiples based on a number of factors which
included Greenhill's professional judgment and experience, taking into account
among other things, TEGNA's historical and current trading multiples, selected
peer historical and current trading multiples, macro-economic factors and
industry trends. Greenhill then discounted the unlevered free cash flow
estimates and the range of terminal values to present value as of December 31,
2021 using discount rates ranging from 8.00% to 9.00% for TEGNA. Then, Greenhill
subtracted net debt, redeemable noncontrolling interests and unfunded pension
liability and added equity investments to derive an implied equity value, which
it then divided by the number of fully diluted shares, as provided by management
of TEGNA, to obtain a range of implied equity values per share as follows:
Range
Consensus Estimates Case $21.57 to $26.47
Weighted Sensitivity $21.61 to $26.51
Base Case $23.19 to $28.30
Pessimistic Case $13.55 to $17.36
Optimistic Case $28.74 to $34.59
The fourth full paragraph on page 56 of the Proxy Statement, located under the
subheading "Other Information-Present Value of Future Share Price," is hereby
amended and supplemented as follows:
For reference only and not as a component of its fairness analyses, Greenhill
calculated a range of the present values of future share prices using the
multiple reference range of 7.0x to 8.0x based on the ratio of enterprise value
to average 2022-23E Weighted Sensitivity Case EBITDA and a 12.3% cost of equity
for TEGNA based on the Capital Asset Pricing Model which takes into account
certain key inputs and assumptions such as macro-economic assumptions, estimates
of risk, the opportunity cost of capital and other appropriate factors. Based on
the foregoing, Greenhill noted that the range of such present values of future
shares share price was $22.09 to $26.54 per share of TEGNA common stock.
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The fifth full paragraph on page 56 of the Proxy Statement, located under the
subheading "Other Information-Precedent Premiums Paid," is hereby amended and
supplemented as follows:
For reference only and not as a component of its fairness analyses,
Greenhill reviewed publicly available data about premiums paid for (i) 171
transactions across all industries, announced in the last five years, and
involving a U.S. acquirer and target and a minimum transaction value of
$500,000,000, (ii) 27 transactions across all industries, announced in the last
five years, and involving a U.S. acquirer and target and a transaction value
between $5,000,000,000 and $10,000,000,000 and (iii) six transactions announced
in the last five years and involving a U.S. acquirer and target and only targets
in the broadcasting, cable and satellite TV, advertising and marketing services,
and publishing industries. Taking into account that data, Greenhill calculated a
range of implied share prices by applying a range of precedent premiums paid
from 25% to 35% to the unaffected closing price of TEGNA common stock of $17.26
as of September 14, 2021. Based on the foregoing, Greenhill noted that the range
of implied prices per share was $21.58 to $23.30 per share of TEGNA common
stock.
The sixth full paragraph on page 56 of the Proxy Statement, located under the
subheading "Other Information-Equity Research Analyst Price Targets," is hereby
amended and restated in its entirety to read as follows:
For reference only and not as a component of its fairness analyses, Greenhill
reviewed certain equity research analyst the price targets for TEGNA common
stock between TEGNA's Q2'21 earnings release on August 9, 2021 and September 14,
2021 that were published by the following equity research analysts: Guggenheim,
Benchmark, Barrington, Wells Fargo, Baptista, Cannonball and J.P. Morgan.
Greenhill noted that the range of such price targets was $20.00 to $24.00 per
share of TEGNA common stock and that the mean price target was $22.00 per share
of TEGNA common stock.
The section of the Proxy Statement entitled "Proposal 1: Adoption of the Merger
Agreement-Management Projections" is amended and supplemented as follows:
The following paragraph is hereby added after the table on page 60 of the Proxy
Statement:
For purposes of their fairness opinions, J.P. Morgan and Greenhill used, among
other metrics, the following financial metrics provided by TEGNA management:
(1) the aggregate net amount, as of December 31, 2021, of net debt, redeemable
noncontrolling interests, unfunded pension liability and equity investments of
TEGNA, which amounted to a net reduction of enterprise value by $3,193,717,374
when bridging from enterprise value to equity value and (2) fully diluted shares
of 226,630,314 as of February 18, 2022.
Additional Information and Where to Find It
In connection with the proposed transaction, the Company filed with the SEC the
Proxy Statement on April 13, 2022. Mailing of the Proxy Statement occurred on or
about April 13, 2022. THE COMPANY URGES YOU TO READ THE PROXY STATEMENT AND
OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AS THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
COMPANY, THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors may obtain a
free copy of the Proxy Statement and other related documents (when available)
filed by the Company with the SEC at the website maintained by the SEC at
www.sec.gov. Investors also will be able to obtain a free copy of the Proxy
. . .
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