Tribune Terminates Sinclair Merger, Sues Broadcast Rival--3rd Update
09 Agosto 2018 - 9:30AM
Noticias Dow Jones
By Joe Flint
Tribune Media Co. terminated its merger agreement with rival TV
station-owner Sinclair Broadcast Group and sued the company,
alleging it failed to make sufficient efforts to get their $3.9
billion deal approved by regulators.
Last month Federal Communications Commission Chairman Ajit Pai
said he had serious concerns about Sinclair's submissions as part
of the agency's review, and sent it to an administrative law judge,
a severe blow to the merger's approval chances.
The suit, filed in Delaware Chancery Court, seeks $1 billion of
lost premium to Tribune stockholders and additional damages.
Tribune alleges that Sinclair breached the merger agreement by
engaging in "unnecessarily aggressive and protracted negotiations"
with regulators over their requirement that Sinclair divest
stations in certain markets to obtain approval. The deal structures
that Sinclair proposed, which Tribune said were done to allow it to
maintain control over stations, created risks for the deal in
violation of the merger agreement, Tribune alleges.
The collapse of the deal and lawsuit mark a stunning turn of
events for a deal that when it was announced in May 2017 seemed
certain to receive regulatory approval.
"Our merger cannot be completed within an acceptable time frame,
if ever, " Tribune Media Chief Executive Peter Kern said in a
statement. "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 didn't immediately respond to a request for
comment.
During a call to discuss its quarterly earnings Wednesday,
Sinclair said it was continuing to work with Tribune to "analyze
approaches to the regulatory process that are in the best interest
of our companies, employees and shareholders."
After the FCC's move, Sinclair denied that it had done anything
to mislead the agency and said its proposed spin offs are
"consistent with structures that Sinclair and many other
broadcasters have utilized for many years with the full approval of
the FCC."
Tribune could now be back in play. Other companies that were
pursuing it along with Sinclair included 21st Century Fox and
Nexstar Media Group Inc.
Media watchdogs had challenged the deal because of concerns that
it would put too many local television stations under one roof.
Sinclair owns more than 170 television stations in mostly midsize
and smaller markets, while Tribune has 42 stations in major
markets.
The issue that caused the deal to hit a roadblock at the FCC was
the structure of Sinclair's proposals to spin off TV stations.
Mr. Pai, the FCC chairman, said evidence suggested that
Sinclair's spinoff proposals would still leave it in practical
control of those stations "in violation of the law."
In one proposal, Sinclair said it would sell Tribune's WGN-TV
Chicago to Steven Fader for $60 million. That price was seen as far
below the station's market value, and Sinclair Chairman David Smith
sits on the board of a car-dealership concern where Mr. Fader
serves as chief executive.
Sinclair was given several opportunities to resubmit its spinoff
plans but none passed the bar with regulators. Mr. Pai expressed
concern about a possible lack of candor on Sinclair's part with
regard to the proposed transactions.
When a merger goes before an administrative law judge, that is
typically a death knell for the deal.
In the lawsuit, Tribune alleges that Sinclair violated its sales
agreement because of its constant efforts to try to hold on to
control of TV stations that regulators wanted divested in return
for approval.
The Sinclair-Tribune deal also triggered an investigation by the
Justice Department into whether station owners violated antitrust
law by sharing ad sales information that potentially could lead to
higher advertising rates.
Another casualty of the Sinclair-Tribune deal collapse is 21st
Century Fox's deal to acquire seven of the Tribune stations from
Sinclair for $910 million. Tribune said it had notified Fox it has
terminated that agreement. Tribune said no fees are payable by any
party.
21st Century Fox and Wall Street Journal parent News Corp share
common ownership.
Write to Joe Flint at joe.flint@wsj.com
(END) Dow Jones Newswires
August 09, 2018 10:15 ET (14:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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