Tribune terminates merger agreement with Sinclair, files suit for breach of contract
09 August, 2018, 21:16
Last month, the Federal Communications Commission voiced concerns that Sinclair may have attempted to skirt ownership rules, and ordered the potential transaction to go through an administrative hearing. A sticking point for regulators at the FCC and the Justice Department was a series of side deals that Sinclair had proposed in order to bring the combined company into compliance with regulations on the number of local TV stations a company could own.
But Tribune announced today "that it has filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract".
Sinclair Broadcast Group had offered to buy the Chicago company's 42 TV stations and had agreed to get rid of stations in some markets to gain regulatory approval.
"In an effort to maintain control over stations it was obligated to sell if advisable to obtain regulatory clearance, Sinclair engaged in belligerent and unnecessarily protracted negations with DOJ and the FCC over regulator requirements... all in the service of Sinclair's self-interest and in derogation of its contractual obligations", the suit alleges.
Pai´s statement raising questions about whether Sinclair would continue to control some of the stations it proposes to divest followed similar questions raised in separate filings by the American Civil Liberties Union and conservative news outlet Newsmax Media. "Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable", he said. It also said the $60 million purchase price for Tribune's WGN-TV in Chicago "appeared to be significantly below market value".
The surprising announcement comes just hours after Sinclair, on Wednesday, said merger talks were continuing.
Public Knowledge, an advocacy group that has been critical of the FCC under Pai, has been against a tie up between Sinclair and Tribune from the start.
The Maryland company said Thursday in a prepared statement that the Tribune lawsuit is "entirely without merit".
The company is "open to all opportunities" in terms of industry consolidation or remaining independent, Tribune Media Chief Executive Officer Peter Kern told investors on a call on Thursday.
It was admonished by media watchdogs in April after dozens of Sinclair news anchors read an identical script expressing concern about "one-sided news stories plaguing the country".
If no divestitures were made, "the combined company would reach 72 percent of United States television households and would own and operate the largest number of broadcast television stations of any station group", the FCC notes. It could have had a new show on WGN America or had an existing show moved there.