Media giants Sinclair and Tribune were all set to merge and create one of the countrys biggest broadcasters — and a complacent FCC seemed to be doing everything it could to help the deal along. But the regulator had a change of heart after evidence surfaced of duplicity too serious to be ignored, and the resultant red tape and bad PR provoked Tribune into spiking the deal and suing its would-be acquirer for $1 billion. The FCC, which until recently had been accused of being overly chummy with broadcasters, Sinclair in particular, last month issued a de facto merger death sentence to the deal, citing mounds of evidence that the company was shirking the terms of the merger and lying about it. The legal process of working out these issues with a view to approving the merger might have taken years. Tribune wasnt having that, and moved quickly to throw Sinclair under the bus. In a statement posted to the companys website, the company wrote that Sinclairs entire course of conduct has been in blatant violation of the Merger Agreement and, but for Sinclairs actions, the transaction could have closed long ago. The legal complaint published simultaneously goes into further detail: From virtually the moment the Merger Agreement was signed, Sinclair repeatedly and willfully breached 3 its contractual obligations in spectacular fashion… Sinclair fought, threatened, insulted, and misled regulators in a misguided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell. The damage, it asserts, amounts to a round $1 billion. This merger failing can hardly be considered as anything but good news to consumers; as former counsel at the FCC Gigi Sohn put it: This transaction had but two supporters – Sinclair and Tribune. It was opposed by large and small cable companies, rural broadband providers, conservative cable channels and the public interest community. Chairman Pai and his colleagues did right by the American people and the entire broadcast industry by putting the brakes on this merger. The ACLUs Jacob Hutt was even less diplomatic: This was a terrible idea to begin with. The merger would have trampled on First Amendment principles, crippled the future of journalism, and disproportionately harmed minority communities. We thank the thousands of activists that raised their voices to prevent the damage this deal would have done. But the most erudite insult surely comes from Sinclairs complaint. Sinclair was impervious to appeals to its contractual obligations. It intended to pursue its own narrow self-interest regardless of its obligations until the FCC found its conduct so egregious as to merit administrative review. Tribune is now the victim of that outrageous obduracy. Emphasis mine. I congratulate Tribunes lawyers on their prose.
This comes after the FCC referred the deal to a judge back in July. Today, Tribune Media announced that it is no longer interested in Sinclair's $3.9 billion takeover. Furthermore, the company is filing suit against Sinclair for breach of contract, which asks for compensation for all of Tribune's losses as a result of the breach. Sinclair wanted to purchase Tribune Media's 42 stations in 33 markets, but there was a problem. The company already owned 173 stations in 81 markets. While the FCC doesn't put a number cap on the number of stations a single company can own, it can't be above 39 percent of the total (though the FCC has been more lax in the past about UHF stations). As a result, Sinclair planned to sell off 21 of its stations. But the FCC had issues with the way Sinclair was approaching these sales and was concerned the company could buy the stations back after the merger was complete. The FCC voted to send the sale to a judge via a Hearing Designation Order (HDO), which usually means that a deal is dead. Now, unsurprisingly, Tribune has backed out. The reason Tribune has filed suit is that Sinclair agreed to use "best reasonable efforts" to make the sale happen by pursuing the sell off of some of its own stations. But constructing deals in such a way that would allow the company to maintain control or re-purchase them wasn't what Tribune had in mind. "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, in a release. "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."