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Sinclair Broadcast Group’s $3.9 billion takeover of Tribune Media, which would have created a local TV giant reaching nearly two-thirds of U.S. TV households, is dead.
Tribune Media made the announcement early Thursday, with analysts expecting that it will now look for a different buyer for its 42 TV stations, network WGN America and other assets. The news comes after a series of developments that cast doubt over the transaction, which had been unveiled 15 months ago.
Tribune said that it “has terminated its merger agreement with Sinclair Broadcast Group Inc. and that it has filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract.” It added: “The lawsuit seeks compensation for all losses incurred as a result of Sinclair’s material breaches of the merger agreement.”
It added: “The complaint alleges that Sinclair willfully and materially breached its obligations under the merger agreement to use its reasonable best efforts to promptly obtain regulatory approval of the merger so as to enable the merger to close as soon as reasonably practicable.”
Wednesday was the first day on which Tribune Media could walk away from the mega-deal under the takeover agreement. After the stock market close on Wednesday, the company said it would hold a conference call at 8 a.m. ET on Thursday, but didn’t immediately announce a decision. Analysts took that as a signal that it was ready to abandon the planned sale.
FCC chairman Ajit Pai earlier this summer cited “serious concerns” about the Sinclair-Tribune deal, with the FCC referring it to an administrative law judge. The FCC particularly criticized so-called “sidecar” deals that would have allowed Sinclair to divest certain TV stations to comply with ownership limits. But they would keep the stations under Sinclair’s control, the agency argued.
Meanwhile, class-action lawsuits over the alleged fixing of advertising prices before deal approval added further headaches.
“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 Tribune CEO Peter Kern on 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.”
Sinclair had left its options open. “In regards to the acquisition of Tribune Media Co., we are working with them to analyze approaches to the regulatory process that are in the best interest of our companies, employees and shareholders,” CEO Chris Ripley said in the company’s earnings press release earlier this week.
Kern said on an earnings call on Thursday morning that Tribune Media remains “open” to other transactions. “I think what happened was not a function of an unwelcome regulatory environment,” he said. “So, we think the environment remains welcoming and open … “
Assessing the attempt to consummate the transaction, Kern said, “When a company spends 15 months trying to close a deal, it’s always hard on an enterprise.”
The company said that its complaint against Sinclair will be made public later on Thursday morning, and that the complaint includes a “dollar amount” ask.
The cancellation of the deal has wide-spreading consequences. Pending approval of the deal, Kern was expected to head to Univision Communications in a “significant role,” The Hollywood Reporter had learned. Bloomberg reported on Aug. 2 that chairman Haim Saban viewed Kern as his successor.
Sinclair was expected to use WGN America as a platform to launch a competitor to Fox News, a plan that will be shelved after the termination. The cancellation will benefit Fox News, Newsmax and other conservative television channels.
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