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Tribune Media withdraws from $3.9B buyout by Sinclair, files lawsuit

10 August 2018
Tribune Media withdraws from $3.9B buyout by Sinclair, files lawsuit

Sinclair is the nation's largest local broadcaster, reaching about 4 in 10 US households through TV stations. ("Sinclair"), and that it has filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract.

Tribune is seeking an amount "including but not limited to approximately $1 billion of lost premium to Tribune's stockholders and additional damages in an amount to be proven at trial".

Tribune said it will sue Sinclair for breach of contract, arguing Sinclair's negotiations with the US Justice Department and FCC were "unnecessarily aggressive".

Sinclair Broadcast Group Inc. wanted the Chicago company's 42 TV stations and had agreed to dump nearly two dozen of its own to score approval by the Federal Communications Commission.

Tribune Media is a parent company of WGN-TV.

The FCC said in July Sinclair "did not fully disclose" facts about the merger, raising questions about whether the company had "attempted to skirt the commission's broadcast ownership rules" and would, in fact, actually control the stations Sinclair said it was divesting.

But constructing deals in such a way that would allow the company to maintain control or re-purchase them wasn't what Tribune had in mind.

"In light of (the FCC order), this transaction can not be completed within an acceptable time frame, if ever", Kern said.

Tribune has been considering its options since the Federal Communications Commission voted last month to send Sinclair's application to a review by an administrative law judge, a move that typically signals the end of such mergers. "Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable", he added.

Sinclair has defended the decision to have its anchors read from the same script across the country as a way to distinguish its news shows from unreliable stories on social media.

Ted Rouse, a Chicago-based partner with Bain & Company specializing in mergers and acquisitions, said it may be hard for Tribune Media to return to business as usual after 15 months in limbo.

To attempt to satisfy the FCC, Sinclair had said last month it would not divest WGN and would seek to put the two Texas stations into a divestiture trust to be sold and operated by an independent trustee. "This deal would have contributed to the trend where "local" news and "local" programming is created or scripted out of town".

With the Tribune merger dead for good, Sinclair will look for other ways to acquire new stations. "It is especially great news for those consumers served by smaller video providers that have been victimized in the past by outrageous retransmission consent fee hikes and scurrilous signal blackouts by large corporate broadcasters".