Coverage: The Tribune Media-Sinclair deal is dead

Sinclair Broadcast Group’s proposed $3.9-billion deal, which was first announced in May 2017, to acquire Tribune Media is dead, and Tribune now wants $1 billion from Sinclair.

Stephen Battaglio of the Los Angeles Times had the news:

Tribune also said it filed a breach-of-contract lawsuit against Sinclair in Delaware Chancery Court, alleging it failed to make its best effort at getting regulatory approval of the sale. Tribune is seeking $1 billion in damages.

“In light of the FCC’s unanimous decision … our merger cannot be completed within an acceptable timeframe, 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.”

The merger has been on hold since the Federal Communications Commission voted July 19 to have the proposal reviewed by an administrative court, a process that has a history of killing such deals.

Sinclair’s plan to buy Tribune’s 42 TV stations — including Los Angeles outlet KTLA-TV Channel 5 — had been expected to benefit from President Trump’s appointment of FCC Chairman Ajit Pai, who is considered a strong proponent of deregulation of the broadcast industry.

Brian Fung and Tony Romm of The Washington Post reported that Tribune alleges Sinclair breached the agreement:

In the lawsuit, Tribune accused Sinclair of engaging in “belligerent and unnecessarily protracted negotiations” with the FCC as well as the Justice Department, which reviewed the merger over its potential effects on competition. By failing to divest television stations as regulators recommended, Tribune said Sinclair had “breached” the companies’ merger agreement, which required them to make their best efforts to secure federal approval.

“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,” said Peter Kern, Tribune’s chief executive officer, 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.”

In response, Sinclair chief executive Chris Ripley said in a statement Thursday that the company is “extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination.” He said that Sinclair “did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency.”

But Ripley stressed that Tribune’s lawsuit is “entirely without merit, and we intend to defend against it vigorously.”

David Shepardson of Reuters reported that President Donald Trump wanted the deal to go through:

The FCC’s chairman, Ajit Pai, has been vocal in his opposition to the deal, a stance that was criticized by Trump.

“So sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune,” Trump said on Twitter in July. “This would have been a great and much needed Conservative voice for and of the People.”

The advocacy group Free Press said in an FCC filing in August 2017 that Sinclair forced its stations to “air pro-Trump propaganda and then seeks favors from the Trump administration.”

Pai told Congress after Trump’s tweet that he stood by his decision to refer the issue to a hearing.