Tribune Files Lawsuit Against Sinclair, Effectively Ending Merger - TvTechnology

Tribune Files Lawsuit Against Sinclair, Effectively Ending Merger

Company called Sinclair's divestiture actions 'a blatant violation of merger agreement'
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NEW YORK—Tribune Media Company today announced that it has terminated its $3.9 billion merger with Sinclair Broadcast Group and that it has filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract. The lawsuit seeks $1 billion in compensation for all losses incurred as a result of Sinclair’s material breaches of the merger agreement, including lost premium to Tribune’s stockholders and additional damages in an amount to be proven at trial. .

The merger had already been on life support since last month when FCC Chairman Ajit Pai, who originally supported the proposed deal, did an about face, expressing doubts about the acquisition after reviewing station transactions—in particular, two stations in Texas and WGN-TV in Chicago, characterizing them as “sham” transactions.

Later, the commission announced that it would send the proposed merger to an administrative law judge for review. 

August 8 was the deadline for the merger to be completed and Tribune's announcement comes one day after Sinclair said it was continuing to pursue the merger.

In announcing its lawsuit Tribune claimed that Sinclair “engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements, refused to sell stations in the markets as required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay—all in derogation of Sinclair’s contractual obligations.”

Tribune went on to say that “ultimately, the FCC concluded unanimously that Sinclair may have misrepresented or omitted material facts in its applications in order to circumvent the FCC’s ownership rules,” adding “Sinclair’s entire course of conduct has been in blatant violation of the merger agreement and, but for Sinclair’s actions, the transaction could have closed long ago.

“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.”

Opponents to the deal were quick to declare victory. 

“The collapse of this merger is as major a victory for American consumers as it is a defeat for the propaganda pushers at Sinclair," said Karl Frisch, executive director of Allied Progress. "Dozens of communities will now be sparred from nightly force-feedings of content advancing the fringe political agenda of the media behemoth's owners." 

The $3.9 billion deal would have added 42 stations to Sinclair’s current stable of 193 stations. Even after selling off a number of stations to comply with federal rules, the combined group would control 215 stations reaching 62 percent of U.S. households in 102 television markets. 

This article has been updated.