$3.9B buyout of Tribune by Sinclair ends in acrimony

Tribune Media terminates merger agreement with Sinclair files lawsuit for breach of contract

Last month, the Federal Communications Commission voiced concerns that Sinclair may have attempted to skirt ownership rules, and ordered the potential transaction to go through an administrative hearing. The company already owned 173 stations in 81 markets.

"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 can not be completed within an acceptable timeframe, if ever", said Peter Kern, Tribune Media's Chief Executive Officer. The company, the largest owner of local television stations in the United States, has drawn attention recently for repeating claims by U.S President Donald Trump that traditional television and print publications offer "fake" or biased news.

Nexstar Media Group (NXST.O) and Twenty-First Century Fox Inc (FOXA.O), partnering with private equity, had considering buying Tribune before Sinclair announced its deal and are likely bidders, analysts have said.

As a result, Sinclair planned to sell off 21 of its stations. In addition, Tribune said, Sinclair outright refused to sell station in some markets.

"To maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements", Tribune said. By one estimate, the combined company would have owned stations in almost 3 out of 4 USA households, controlling an enormous amount of the content Americans see on local stations.

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The complaint seeks $1 billion from Sinclair to cover the "lost premium to Tribune's stockholders", plus "additional damages in an amount to be proven at trial". In Los Angeles, they own KTLA channel 5 and in Chicago, they own WGN TV.

The Maryland company said Thursday in a prepared statement that the Tribune lawsuit is "entirely without merit". In the case of Sinclair-Tribune, there is no such fee attached to the merger agreement.

The backstory: The deal was thought to be a sure thing, but the FCC threw a wrench into it after Chairman Ajit Pai, who is favorable to industry consolidation, raised questions about the validity of some of the deal terms provided to the commission by Sinclair.

"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", Pai said. It announced plans previous year to merge with Chicago-based Tribune, a deal that would have given Sinclair access to 72 percent of American households. Sinclair defended the script as a way to distinguish its news shows from unreliable stories on social media.

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