Tribune Breaks Off $3.9B Sinclair Merger, Sues Sinclair

Danny Woods
August 10, 2018

The merger would've created the largest local broadcaster in America.

In a victory for free and independent journalism, Tribune Media said on Thursday that it is pulling out of its $3.9 billion merger with Sinclair Broadcast Group, putting the final nail in the coffin of a deal that had seemed inevitable when it was first announced in May of previous year.

Hunt Valley, Md. -based Sinclair agreed to buy Tribune Media's 42 TV stations in May 2017, creating what would be the largest ownership group in the USA, with 233 stations.

Last month, however, Federal Communications Commission Chairman Ajit Pai said that he had "serious concerns" about the deal, saying that Sinclair might still be able to operate the stations "in practice, even if not in name".

'To maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements, ' Tribune said. On Thursday, Kern said that any further delays would hurt his company - so the Tribune board chose to spike the deal.

Tribune Media Co., which is on the hook for a $135 million breakup fee, said Thursday that it is suing Sinclair for breach of contract and at least $1 billion in damages, according to the complaint.

The Sinclair Broadcast Group was its roots in the early 1970s, when Julian Sinclair Smith operated an FM radio station and a TV station in Baltimore. And the sales allegedly had strings attached that would allow Sinclair to retain significant control over the stations' operations and programming. Sinclair has been scrutinized for its ties to the Trump administration.

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Kern told employees in an email reviewed by Reuters that it was not clear what was next for Tribune.

On Thursday, Kern said the FCC order, which has been the death knell for previous media mergers, was the final straw for Tribune Media.

"We think that it is likely that another suitor will emerge for Tribune in the near-term", Kenneth Duffel, an analyst with KDP Investment Advisors, said in a note.

"The lawsuit described in Tribune's public filings today is entirely without merit, and we intend to defend against it vigorously".

"We've done everything we could to assist Sinclair in getting through the regulatory process, and it's been a huge undertaking for our company to manage through this prolonged exercise, while also keeping our business running strong", Tribune Media CEO Peter Kern said during an earnings call Thursday morning. But the Hunt Valley, Maryland-based company had offered to sell some stations to comply with Federal Communications Commission rules.

Sinclair already has 173 stations around the country, including KENV in Salt Lake City, KOMO in Seattle and WKRC in Cincinnati.

A survey by the Washington Post in December 2016 showed that the coverage by Sinclair-run news outlets was "disproportionately" favorable to Trump in the election year.

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