Tribune Breaks Off $3.9B Sinclair Merger, Sues Sinclair

Sinclair Broadcast Group’s headquaters in Hunt Valley Md

Steve Ruark Associated Press Sinclair Broadcast Group’s headquaters in Hunt Valley Md

Sinclair Broadcast Group Inc. wanted the Chicago-based company's 42 TV stations and had agreed to sell nearly two dozen of its own to score approval by the Federal Communications Commission.

If no divestitures were made, "the combined company would reach 72 percent of USA television households and would own and operate the largest number of broadcast television stations of any station group", the FCC notes.

"In an effort to maintain control over stations it was obligated to sell if advisable to obtain regulatory clearance, Sinclair engaged in belligerent and unnecessarily protracted negations with DOJ and the FCC over regulator requirements... all in the service of Sinclair's self-interest and in derogation of its contractual obligations", the suit alleges. "Further delay and uncertainly would be detrimental to our company, our business partners and our shareholders, and accordingly, our board made a decision to terminate the merger agreement with Sinclair".

Tribune, which is on the hook for a $135million breakup fee, filed a lawsuit against Sinclair, the largest USA broadcast station owner, alleging material breach of contract 15 months after the merger was first announced. Sinclair also refused to sell certain stations that would have helped the deal secure regulatory approval, Tribune claimed in a news release. And the sales allegedly had strings attached that would allow Sinclair to retain significant control over the stations' operations and programming.

Advocacy group Free Press said in an FCC filing in August 2017 that Sinclair forces its stations to 'air pro-Trump propaganda and then seeks favors from the Trump administration'.

The Sinclair-Tribune mega-merger appears to be dead. The FCC declined to comment on Thursday.

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Tribune employees were notified that the deal was off in a lengthy early-morning memo from Kern that blasted Sinclair and said Tribune had done "everything it was supposed to do". Subsequently, the FCC voted to subject Sinclair's divesture plan to a hearing before an administrative law judge, further delaying completion of the transaction.

Tribune general counsel, Eddie Lazarus, told analysts on the same call the company was seeking a "large number" in damages from Sinclair.

"We are extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination", said Sinclair CEO Chris Ripley.

Sinclair also had planned to sell stations in Dallas and Houston to Cunningham Broadcasting Corp, a company controlled by the estate of Smith's mother.

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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