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Tribune Ends $3.9B Takeover, Sues Sinclair

Returning the ring and making curtains of the dress, Tribune Media filed suit Thursday against Sinclair Broadcast Group over a $3.9 billion buyout offer that had alarmed regulators and legal experts.

PHILADELPHIA (CN) - Returning the ring and making curtains of the dress, Tribune Media filed suit Thursday against Sinclair Broadcast Group over a $3.9 billion buyout offer that had alarmed regulators and legal experts.

The acquisition by conservative-focused Sinclair would have created a massive broadcast group with access to more than 72 percent of all U.S. households. It hit a snag last month, however, when the chairman of the Federal Communications Commission expressed “serious concerns” about the stations Sinclair had agreed to divest to skirt antitrust concerns.

To protect itself from the FCC investigation, Tribune’s suit in Delaware Chancer Court accuses Sinclair of attempting to mislead the government. A copy of the complaint is not yet available, but a press release on Tribune’s website accuses Sinclair of having engaged in "unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission" in the regulatory review of the merger.

"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,” Tribune CEO Peter Kern said in a statement, pointing to FCC Chairman Ajit Pai’s call for an administrative hearing to assess the veracity of some of the information provided to the commission by Sinclair.

"This uncertainty and delay would be detrimental to our company and our shareholders,” Kern continued. “Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable.”

The FCC accused Sinclair of engaging in "a potential element of misrepresentation or lack of candor" in its effort to secure government approval. It also raised concerns about business ties that likely lowered the purchase price of Tribune's WGN-TV Chicago below market value, at $60 million, for a new entity controlled by the CEO of Atlantic Automotive Group.

Tribune has not yet announced whether it will move to sell off its stations in piecemeal fashion. If so, it is possible Sinclair will still absorb several stations. As part of Sinclair’s divestiture plan, Fox Television Stations had already proposed a deal with the company to acquire seven of Tribune's Fox affiliate stations after the merger for $910 million.

Tribune’s suit asserted that Sinclair violated the terms of its contract, which called for Sinclair to make a good-faith effort to comply with regulatory requirements.

"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," Tribune said in its lawsuit, according to the statement posted on its website.

Sinclair has not yet responded to a request for comment.

Larry Epstein, a professor who heads the Department of Arts & Entertainment Enterprise at Drexel, noted in an interview that Tribune could end up making the $3.9 billion that Sinclair offered by selling off its 42 TV stations individually.

“Tribune’s decision was a sound business decision,” Epstein said.

Regarding the allegations that Sinclair misled the FCC, Epstein called it “a case of a media company … wanting to have its cake and eat it too.”

At the Georgetown Law Institute for Technology Law & Policy meanwhile, news of Tribune's decision sparked applause from a distinguished fellow Gigi Sohn.

“Today is a good day for every American who believes that diversity of voices in the media is better for our democracy,” said Sohn, who was counselor to former FCC Chairman Tom Wheeler from November 2013 to December 2016. “The combination of Sinclair and Tribune would have created a media mega-monster that would have put far too much power over local news and information in the hands of one company. Moreover, as the FCC found in its Hearing Designation Order, Sinclair may have misrepresented to the agency whether it was really ceding control of some of the TV stations it had promised the government that it would divest.  If true, this allegation raises a legitimate question as to whether Sinclair is fit to be a broadcast licensee at all, not just a licensee of Tribune's stations.”

Sohn noted that, but for the support the deal attracted from parties themselves, the merger “was opposed by large and small cable companies, rural broadband providers, conservative cable channels and the public interest community.”

Another supporter of the merger had been President Donald Trump, who called it “sad and unfair” last month that the FCC voted against the deal.

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