Sinclair Reportedly Near Deal for Tribune Media

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Tribune Media HQ, Chicago

Sinclair is in pole position after Fox doesn't move forward with bid.

Sinclair Broadcast Group was nearing a deal for Tribune Media on Sunday after 21st Century Fox and private equity firm Blackstone did not move forward with a possible joint bid for the company, according to sources.

Tribune Media and Fox representatives declined to comment.

Two sources familiar with the bidding process said Sinclair was the favorite to seal a deal as of Sunday midday. One source added that Fox and Blackstone didn’t ultimately move forward with an offer, but it wasn't immediately clear why. Another source said Sinclair and Tribune Media had not completed a deal yet as of Sunday midday, though, with the situation remaining fluid.

It wasn't immediately clear if anyone else had submitted offers. Reuters reported that the deal could be worth $44 per share, compared with Tribune Media's Friday closing price of $40.29, which gave the company a market value of around $3.5 billion. 

Wall Street analysts had said it was understood that bids were due on Thursday. Tribune Media owns 42 TV stations, including Fox stations, as well as cable network WGN America and Tribune Studios.  

Sinclair Broadcast Group, including all pending transactions, owns, operates and/or provides services to 191 TV stations in 89 markets. Among them are 54 Fox affiliates, making it the largest Fox station group.

Analysts and sources said 21st Century Fox's potential bid for Tribune was designed to keep Sinclair from gaining more leverage in talks with the conglomerate at a time when retransmission consent fees (pay TV operators' payment to broadcasters) and reverse compensation (stations' payment to a network for being allowed to affiliate with it) have become growing revenue streams.

"We think Fox's interest could be in large part defensive to prevent Sinclair from gaining greater leverage in reverse comp negotiations (Sinclair already owns 54 Fox affiliates)," RBC Capital Markets analyst Steven Cahall said on Monday. 

Analysts have said that a possible change to the 39.6 percent national ownership cap for TV station owners could lead to more dealmaking in the TV station sector following a recent FCC rule change that benefited station groups. So the battle for Tribune could just be the first step in a bigger consolidation wave as the Trump-era FCC reviews the rules of play.

The recent FCC move that has put TV stations back in focus was the reinstatement of what is known as the "UHF discount," which excludes channels carried over UHF waves from the calculation for how many markets a station group operates in.

"I’ll work aggressively to modernize the FCC’s rules, cut unnecessary red tape and give broadcasters more flexibility to serve their audiences," FCC chairman Ajit Pai said last week.