Tribune files $1B suit against Sinclair
Sinclair Broadcast Group Inc. saw its bid to become a nationwide media powerhouse collapse after its would-be partner, Tribune Media Co., withdrew from a planned $3.9 billion merger that drew the ire of regulators.
Tr i bu ne, which is on the hook for a $135 million breakup fee, blamed Sinclair and filed a $1 billion lawsuit that claimed the broadcaster “engaged in belliger- ent and unnecessarily protracted negotiations” with antitrust officials and with the FCC. The blow sent Sinclair’s shares tumbling as much as 5.4 percent.
“Regulatory approval should not have been hard to come by,” Tribune said in the complaint filed in Delaware Chancery Court. “Sinclair fought, threatened, insulted, and misled regulators in a mis- guided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell.”
The implosion marks the latest twist in an increas- ingly strange environment for mega-deals under President Donald Trump. A Sinclair-Tribune combination would have been unthinkable in the Obama era and was only made possible because of a rule change by the newly installed chief at the Federal Communications Commission. But the FCC later questioned Sinclair’s honesty and sent the proposed tie-up for a hearing by an administra- tive law judge. Trump, who tried to stop another mon- ster-merger, AT&T’s acquisition of Time Warner, called the FCC move “disgraceful.”
“Deals are getting done and yet somehow Sinclair ran into trouble and I think everyone’s surprised that this happened,” Barton Crockett, an analyst with FBR Capital Markets, said on Bloomberg Televi- sion. “Tribune is not only surprised but pretty upset about it.”
Ronn Torossian, a spokes- man for Sinclair, didn’t imme- diately respond to a request for comment.
Free med i a advocacy groups cheered the demise of the deal.
Public Knowledge, an advo- cacy group that has been crit- ical of the FCC under Pai, has been against a merger between Sinclair and Tribune from the start.
“While what has apparently killed this deal was Sinclair’s pattern of deception at the FCC — a fact that should affect its future dealings at the Commission — the deal was bad on its own merits, and this latest development is good for con- sumers,” said Phillip Berenbroick, senior policy counsel at the organization. “Broadcasters are supposed to serve their local communities. This deal would have contributed to the trend where ‘local’ news and ‘local’ programming is cre- ated or scripted out of town.”
Sinclair tumbled to as low as $25.65 a share. The stock has now plunged almost 20 percent since mid-July. Tribune, meanwhile, rose as much as 3.6 percent to $34.85.
The FCC order on July 18 asked whether Sinclair was in fact the hidden buyer in a proposal to sell Chicago’s WGN-TV to a Maryland automobile executive with no prior broadcast experience and ties to Sinclair management. The agency also questioned links between the Maryland-based broadcaster and a buyer proposed for stations in Dallas and Houston.
The FCC wanted a judge to decide whether “Sinclair engaged in misrepresentation and/or lack of candor in its applications” and asked whether Sinclair had “attempted to skirt the commission’s broadcast ownership rules.”