Sinclair Updates Tribune Merger Bid, ‘Shocked’ by FCC’s Regulatory Concerns

Company amends its plans for stations in Houston, Dallas and Chicago

Last Updated: July 19, 2018 @ 11:48 AM

Sinclair Broadcasting Group will update its divestiture plan in an effort to appease U.S. regulators, the company said on Wednesday as its $3.9 billion takeover of Tribune Media hangs in the balance following the FCC’s “serious concerns” about the deal.

The amended plan has Sinclair withdrawing its divestiture of stations in Dallas (KDAF) and Houston (KIAH), which were set to be sold to Cunningham Broadcasting. Sinclair will look for a new buyer for the stations via an independent trustee. Sinclair will also acquire WGN-TV in Chicago as part of a larger deal with Tribune, the company said.

Sinclair’s announcement comes after FCC Chairman Ajit Pai on Monday called into question the company’s plan to sell several TV stations to gain approval from U.S. regulators, saying the deal would still allow Sinclair to control the stations. Pai has proposed sending the merger to a hearing before an administrative law judge —  putting the deal in regulatory limbo.

“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction,” Pai said in a statement. “The evidence we’ve received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law.”

Sinclair said on Wednesday it was “shocked” by Pai’s concerns over the legality of its divestiture plans.

“As a result and in light of the ongoing and constructive dialogue we had with the FCC during the past year, we were shocked that concerns are now being raised,” said Sinclair in a statement shared with TheWrap. “Nonetheless, we have decided to move forward with these additional changes to satisfy the FCC’s concerns.”

Even before the deal hit uncertainty this week, the proposed Sinclair-Tribune merger has already had plenty of twists. Pai has been under investigation from the FCC’s inspector general since late last year. Investigator general David L. Hunt is looking into whether Pai spearheaded a rules change in 2017 in cahoots with Sinclair Broadcasting. The new rules allow media companies to increase the maximum amount of television stations they own.

The FCC pulled back on regulations against media consolidation in April 2017. Weeks later, Sinclair announced a nearly $4 billion deal to acquire Tribune Media — an acquisition that wouldn’t have been possible a month earlier. Sinclair owns more TV stations than any other company in the United States. The merger would allow Sinclair to bolster its lineup in dozens of markets, including New York and Chicago.

A draft of the FCC’s order said the merger may “involve deception,”according to Reuters.

Sinclair pushed back on Wednesday, saying it has” fully disclosed all terms of all aspects of the transactions it has proposed.

The station owner has been widely ridiculed for enforcing “must run” commentaries in its subsidiary stations’ broadcasts. Sinclair faced threats of an employee walkout and advertiser boycott in April over a video showing dozens of its news anchors robotically reading a company-mandated script bashing the media and echoing Trump talking points.

Just this spring, Sinclair hired Trump White House alum Kaelan Dorr as its new executive political producer.

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