Tribune Media is walking away from its previously announced $3.9 billion merger with Sinclair Broadcast Group and suing the company for breach of contract.
Tribune has accused Sinclair of engaging in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements, refusing to sell stations in the markets as required to obtain approval, and proposing aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay.
In the merger agreement, Tribune stated in its announcement, “Sinclair committed to use its reasonable best efforts to obtain regulatory approval as promptly as possible, including agreeing in advance to divest stations in certain markets as necessary or advisable for regulatory approval.”
The Chicago-based media company filed the lawsuit in the Delaware Chancery Court, seeking compensation for all losses incurred as a result of Sinclair’s material breaches of the merger.
“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 timeframe, if ever,” said Peter Kern, Tribune Media’s Chief Executive Officer. “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.”
Tribune is also suing Sinclair for $1 billion in damages, saying the company failed in “spectacular fashion” to uphold its end of the deal. “Sinclair engaged in belligerent and unnecessarily protracted negotiations with DOJ and the FCC over regulatory requirements,” while refusing to sell stations to help the deal gain approval, said Tribune in its court filing.
The megadeal would have been the first major acquisition of a TV broadcasting group announced since the Federal Communications Commission voted earlier this year to overturn a 2016 decision limiting the number of television stations some broadcasters can own.
But last month, the FCC issued its order for a review of the merger, questioning whether Sinclair “engaged in misrepresentation” in its divestiture plan from several stations, looking to appease U.S. regulators.
“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, in a statement. “We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency. As Tribune, however commented, in their belief, the FCC’s recent designation of the deal for a hearing in front of an Administrative Law Judge would have resulted in a potentially long and burdensome process and, therefore, pursuing the transaction was not in the best interest of their company and shareholders. As for Tribune’s lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction. The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.”
Tribune Media operates 42 TV stations and WGN radio, and reaches more than 43 percent of the nation including major markets like New York, Chicago and Miami. Sinclair operates 171 TV stations in 81 markets, mostly in the South and Midwest.
Pamela Chelin contributed to this report.