Tribune Terminates $3.9 Billion Merger Deal With Sinclair

Tribune Media terminates merger agreement with Sinclair files lawsuit for breach of contract

Tribune Media on Thursday pulled out of a deal to acquire Sinclair Broadcast Group, and is suing for breach of contract, after the group came under scrutiny from US regulators.

FCC Chairman in July expressed "serious concerns" over the deal, saying Sinclair would still control the stations it divested in practice. 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. "Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable", he said.

Sinclair has also been targeted with three federal class-action lawsuits over alleged fixing of ad prices, with sales teams from Sinclair and Tribune accused of colluding before the merger got final approval.

In addition to its merger plans, Sinclair also made headlines in April, when it ordered anchors at dozens of its TV stations to read the same speech during their broadcasts, warning against "biased and false news".

Additional reporting from Newsy affiliate CNN.

Nexstar Media Group (NXST.O) and Twenty-First Century Fox Inc (FOXA.O), partnering with private equity, had considering buying Tribune before Sinclair announced its deal and are likely bidders, analysts have said. Last month, the FCC voted unanimously to subject the merger to an administrative law proceeding, a taxing and time-consuming process that was expected to kill the deal.

Tribune, which is on the hook for a $135million breakup fee, filed a lawsuit against Sinclair, the largest United States broadcast station owner, alleging material breach of contract 15 months after the merger was first announced.

"This uncertainty and delay would be detrimental to our company and our shareholders", Tribune Chief Executive Officer Peter Kern said in the statement.

Sinclair already has 173 stations around the country, including KENV in Salt Lake City, KOMO in Seattle and WKRC in Cincinnati. The transaction would have left Sinclair with more than 200 stations.

Free media advocacy groups cheered the demise of the deal.

"This deal would have contributed to the trend where "local" news and "local" programming is created or scripted out of town and is indistinguishable from cable news", Public Knowledge Senior Policy Counsel Phillip Berenbroick said today.

The deal could still come back together but for now, it looks to be dead.

Ted Rouse, a Chicago-based partner with Bain & Company specializing in mergers and acquisitions, said it may be hard for Tribune Media to return to business as usual after 15 months in limbo.

"Tribune's decision to pull the plug on the Sinclair merger is great news for consumers who will avoid paying the higher pay-TV rates the deal would have caused", ACA CEO Matthew Polka said. "Broadcasters are supposed to serve their local communities".

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