Tegna Stock Soars 30% on Reports of Nexstar Buy Talks. Why It Makes Sense.

Tegna, a major owner of NBC-affiliated TV channels, is in talks to be acquired by rival Nexstar Media Group, according to multiple reports. (Photograph by David McNew/Getty Images)

Shares of Tegna soared on Monday after multiple outlets reported the TV station operator was in talks to be acquired by competitor Nexstar Media Group .

Nexstar, the largest TV station operator in the U.S., boasts more than 200 owned or partner outlets. The company had a market capitalization of $5.63 billion as of Monday morning. Tegna, by comparison, has 64 stations and a market cap of $2.46 billion.

Both companies declined to comment on a potential deal, but speculation was still driving shares higher. Tegna stock surged 28% to $19.66 on Monday, heading for its largest same-day percentage increase since June 2013, and its highest close since Feb. 24, 2023, according to Dow Jones Market Data.

Shares of Nexstar were also on the rise, gaining 6.3%. The benchmark S&P 500 and Nasdaq Composite were flat.

Tegna reported second-quarter earnings last week. While revenue fell 5% from a year ago to $675.05 million, the figure came in above the $671.6 million analysts had expected, according to FactSet. Adjusted earnings of 44 cents a share also topped calls for 37 cents a share.

While it isn’t clear whether a deal will happen, an acquisition would come at an opportune time for the broadcasting peers. The Federal Communications Commission, under the direction of Donald Trump appointee Brendan Carr, has begun to strip away rules governing broadcasting as part of a broader deregulation push.

The agency is responsible for approving the transfer of television-station licenses, which gives it some bearing on deals of this nature. It also sets limits on the number of broadcast stations a company can own, both in a single market and nationwide. Ultimately, changes at the FCC could pave the way for more relaxed ownership caps, allowing fewer players to take a bigger share of the field.

Tegna was created in June 2015, when media company Gannett split into two publicly traded businesses. Tegna is a major owner of NBC-affiliated channels, and comprises the former Gannett broadcast TV and digital media operations.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com