Sources: FCC Expected To Approve Gannett/Belo Deal Friday

Combined company would have 120 days to spin off KMOV St. Louis to new third party

According to multiple sources, the FCC Friday is expected to approve Gannett's $2.2 billion purchase of Belo and spin-off of some of those stations to third parties.

DOJ has already said it is OK with the deal so long as the combined company spins off KMOV St. Louis to an independent third party with which it does not have a sharing arrangement, as it does with the other buyers it is spinning the stations off to ( operating companies headed by former Belo group chief Jack Sander, and Ben Tucker, former head of the Fisher station group) in order to comply with FCC limits on newspaper-broadcast and duopoly rules.

According to someone familiar with the draft order, which the Media Bureau circulated to the commissioners with the notice that it planned to approve the deal on delegated authority within 48 hours unless they had any problem with it, it bakes the KMOV spin-off into the order, with Gannettt/Belo having to find a new buyer within 120 days, after which the FCC will consider that transfer separately.

The order basically does three things. It grants the assignments of license of the stations from Belo to Gannett, with Belo becoming a wholly owned subsidiary. It then grants the transfer of the spin-off licenses to Sander and Tucker, and rejects the petitions to deny the deal filed by various parties, including public interest groups, unions, cable and satellite TV operators concerned that the spin-offs with sharing arrangements were end-runs around FCC ownership rules.

DOJ earlier this week filed both a suit to block the deal and a settlement with Belo resolving the KMOV issue, which is how the process works. The court now must sign off on that agreement, but that is essentially pro forma.

Justice said that without that spin-off, Gannett would have had a dominant position in spot advertising in the St. Louis market, leading to higher ad prices. Gannett had planned to spin-off KMOV and five other Belo stations to Sander that would have run afoul of FCC local ownership limits. But Gannett also planned to provide some services to the Sander stations, including KMOV, where Gannett owns KSDK-TV, the NBC affiliate in St. Louis. Gannett agreements in Belo markets where it has newspapers would include joint sales, though not in St. Louis, where both Belo and Gannett own stations.

But even without that joint sales agreement, Justice said, in the case of KMOV, the joint agreement would have reduced competition for ad rates and that a complete divestiture was necessary given the mix of joint sales, operating and purchase options the deal entails. The Media Bureau clearly agrees.

The commissioners are not expected to object to the bureau order.