Tribune Media said Thursday that it would withdraw from its $3.9 billion merger with Sinclair Broadcast Group, adding that it would sue Sinclair for “breach of contract” over its failed negotiations with regulators over the deal.
The breakdown of the deal reflects a stunning reversal of fortune for Sinclair, which had confidently announced the tie-up last year as a “transformational” event and the biggest acquisition in its history.
But it began to stumble last month after the Federal Communications Commission raised “serious concerns” about the deal, which originally would have reached roughly 70 percent of U.S. households.
“In light of the FCC’s unanimous decision, referring the issue of Sinclair’s conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable time frame, if ever,” Peter Kern, Tribune’s chief executive officer, said in a statement Thursday. “This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable. ”
Sinclair did not immediately respond to a request for comment.
The $3.9 billion deal initially aimed to create a conservative broadcasting giant, with Sinclair proposing to control 233 stations in 108 markets nationwide. The original deal would have meant creating the biggest television company in America, adding Tribune’s 42 stations to Sinclair’s roster. And it would have been a victory for conservative media in a turbulent political environment, in which Republican critics have alleged a systemic negative bias on college campuses and social media.
Sinclair’s proposal ran into resistance last month at the FCC, which is charged with reviewing the deal. As an independent agency, the FCC is supposed to refrain from factoring politics into its merger analyses. But, it said, “serious concerns” surrounding the proposal warranted a closer look by an administrative law judge. The sudden announcement raised alarm bells among investors and analysts; the FCC typically only takes that step when it is moving to block a deal.
A key FCC concern was Sinclair’s offer to spin off a number of stations in Chicago, Dallas and Houston, to buyers that critics said were too close to the company’s leadership. Analysts say Sinclair needed to divest from some stations to comply with a national cap, enforced by the FCC, on any single broadcast company’s national audience reach.
In terminating its merger agreement, Tribune on Thursday charged that Sinclair had engaged in “unnecessarily aggressive and protracted negotiations” with the government. Tribune said that Sinclair “refused to sell stations in the markets as required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay-all in derogation of Sinclair’s contractual obligations.”
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