Sinclair Broadcast countersues Tribune Media

Companies in dispute about who violated terms of their failed merger agreement

Sinclair Broadcast Group fired back Wednesday at Tribune Media, filing a counter-lawsuit against its former merger partner in the wake of the failed $3.9 billion deal to combine the two media giants.

“We are… disappointed that Tribune, through its merit-less lawsuit, is seeking to capitalize on an unfavorable and unexpected reaction from the Federal Communications Commission to capture a windfall for Tribune,” said Chris Ripley, Sinclair’s president and CEO, in a statement.

Earlier this month, Tribune Media canceled its merger with Sinclair and sued the Hunt Valley-based broadcaster for $1 billion, alleging breach of contract. Chicagobased Tribune said Sinclair caused regulators to sour on the deal by trying to sidestep the need to sell television stations to meet national ownership guidelines.

Ripley said Sinclair, the largest U.S. owner of local TV stations, complied with merger agreement obligations and “worked tirelessly to close the transaction. The Company looks forward to vigorously defending against Tribune’s claims and pursuing our own claim.”

Sinclair counter-sued for breach of the agreement in the Delaware Court of Chancery, seeking damages in an amount to be determined.

Tribune pulled out of the merger on Aug. 9 after the FCC sent the merger for review by an FCC administrative hearing judge in the wake of FCC Commissioner Ajit Pai raising “serious concerns” about the deal being in the public interest.

Under the deal announced in May 2017, Sinclair planned to buy Tribune and its 42 stations. It would have given Sinclair control of 233 stations, reaching 72 percent of U.S TV households, and a presence in such top markets as New York and Chicago. (Tribune Media was formerly part of Tribune Co., which once owned The Baltimore Sun and other newspapers, but spun them off in 2014.)

The proposed merger drew wide-ranging criticism from across the political spectrum for giving Sinclair unprecedented access to so much of the nation’s airwaves, which critics said would limit broadcast market competition and diversity. Advocacy groups said they worried that Sinclair would use the platform to push its conservative views.

In its lawsuit Sinclair argues it was simply trying to bargain with regulators to negotiate the best terms, which the merger agreement allowed. Tribune was a full partner in those efforts, the filing adds, with no meaningful disagreements about the process. The companies and their attorneys spent months working together and with regulators, attending meetings, reviewing drafts of responses and adjusting the proposed divestitures, the lawsuit says.

Sinclair’s lawsuit said it hoped to close the deal up to the date of Tribune’s termination, “firmly believing that the transaction presented substantial economic and other benefits for Sinclair and its stockholders, as well as significant public benefits to broadcast media consumers.”

Even after the FCC raised red flags, Sinclair remained committed and willing to explore options, the lawsuit said.

At issue were several proposed TV station sales that the FCC said appeared would remain in Sinclair’s control after being sold. Sinclair argued that Tribune never objected to those divestitures before and instead worked closely with Sinclair on the plans and to jointly respond to public objections.

While Sinclair still hoped to close the deal, “Tribune did not share that mission,” the lawsuit said.

Tribune responded Wednesday saying there is no merit to Sinclair’s claims.

The lawsuit is “simply an attempt to distract from its own significant legal exposure resulting from its persistent violations of Tribune’s contractual rights,” Tribune said in a statement.

The regulatory review of the deal should have been straightforward, Tribune said, but “misconduct” in arranging to sell off stations led the FCC to order a hearing on Sinclair’s lack of candor. That ended any chance at winning approval in a reasonable timeframe, Tribune said.

“Tribune looks forward to holding Sinclair accountable in court,” the company’s statement said.