Tribune Media merger with Sinclair Broadcast collapses in rancour and writs | Major Businesses | Business
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The $3.9 billion deal was supposed to end with the creation of the largest US TV station owner but instead had ended in shambles with lawsuits flying as Tribune Media has terminated its merger with the Sinclair Broadcast Group.

sinclair 3 jan 2018Just as it was announcing its second quarter results, Tribune revealed that it had filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract, seeking compensation for all losses incurred as a result of Sinclair’s material breaches of the merger agreement which it had previously signed.

The merger, first announced in May 2017, would have seen Sinclair bring Tribune’s 42 television stations across 33 markets into its fold, along with cable network WGN America and digital multicast network Antenna TV, and a stake in Food Network.  Somewhat optimistically the two companies expected to close the deal in the fourth quarter of 2017, after securing regulatory clearance but the merger was from the outset dogged by regulatory hurdles, principally those requiring Sinclair to sell certain stations in markets to comply with US broadcast regulator the FCC’s ownership requirements and anti-trust regulations. 

In the suit, Tribune noted that in order to see the deal over the line it was incumbent upon Sinclair to use its “reasonable best efforts” to obtain regulatory approval as promptly as possible, including agreeing in advance to divest stations in certain markets as necessary or advisable for regulatory approval. Tribune now accuses Sinclair of having engaged in “unnecessarily aggressive and protracted” negotiations with the US Department of Justice and the FCC.

It added in an effort to maintain control over stations it was obligated to sell, over regulatory requirements, Sinclair had 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. This, Tribune concluded, was all in derogation of Sinclair’s contractual obligations. On 20 July 2018 the FCC put the merger on indefinite hold while an administrative law judge determined whether Sinclair had indeed acted in a misleading misled the FCC or acted with a lack of candour.

Tribune fundamentally believes that 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 Tribune Media’s chief executive officer Peter Kern. “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,Chris Ripley, Sinclair president and CEO said that Tribune’s lawsuit was entirely without merit, and that his company intended to defend against it vigorously. “We are extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination," he said. "We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candour and transparency... We fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction."

In its second quarter results, Tribune’s consolidated operating revenues increased 4% to $489.4 million and consolidated operating profit was $98.1 million compared with $12.7 million for the second quarter of 2017. Consolidated adjusted EBITDA increased 69% to $160.8 million while television and entertainment net advertising revenues were essentially flat at $311.4 million. Net core advertising revenues decreased 6% to $273.7 million.