Tribune Media has filed a lawsuit against Sinclair Broadcast Group over their failed merger and is seeking $1 billion in damages. Tribune bailed out of the long-pending sale agreement on Thursday in the face of opposition from the FCC and questions about whether Sinclair tried to mislead the government with its divestiture plan, in which it sought to sell some stations to parties close to Sinclair. Tribune cited Sinclair's "unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission" in the regulatory review of the merger as the reason for the suit, filed Thursday in Delaware Chancery Court. "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 CEO. "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." The $3.9 billion transaction, set in May 2017, would have combined two of the country's largest broadcasters into a giant with more than 200 stations. Public interest groups lined up against the merger and Democrats contended that Sinclair was trying to infuse local stations with a conservative bent. The decision to abandon the merger immediately raises the prospect of other suitors for Tribune Media. Industry sources speculate that the company may wind up selling off its assets in piecemeal fashion. Fox Television Stations had already cut a deal with Sinclair to acquire 7 of Tribune's Fox affiliate stations for $910 million as part of its divestiture plan. The deal-breaker on the merger came last month, when FCC chairman Ajit Pai announced that he had "serious concerns" about the transaction. The commissioners voted unanimously to send the merger to an administrative law judge for a hearing, a prospect that likely would add months or a year or longer to the review. Tribune asserted Thursday that Sinclair violated the terms of the agreement that called for Sinclair to make a good-faith effort to comply with regulatory requirements to close the deal as quickly as possible. "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. The FCC claimed that Sinclair engaged in "a potential element of misrepresentation or lack of candor" in its effort to secure government approval. That centered on the way that Sinclair laid out its plans to divest certain stations, a necessity if it was to comply with media ownership limits. Among other things, the FCC zeroed in on the business ties between Smith and businessman Steven Fader in connection with the plan to sell Tribune's WGN-TV Chicago to a new entity controlled by Fader for $60 million. That plan sparked concern from merger opponents because the purchase price was so far below fair market value for a Chicago TV station. Fader is CEO of Atlantic Automotive Group, in which Smith has an equity interest and also sits on its board. The commission's order noted that Fader had no prior broadcast TV experience, and the transaction was structured as to give Sinclair sway over the station's operations. Sinclair denied that it misrepresented the facts in its merger filings. Sinclair's ties to President Donald Trump had been an issue throughout the regulatory process, and Trump publicly expressed his unhappiness at the FCC for failing to approve it. He called it "sad and unfair," and added, "This would have been a great and much needed Conservative voice for and of the People. Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!" One of Trump's former communications spokespersons, Boris Epshteyn, is chief political analyst at Sinclair. Pai, who Trump appointed as FCC chair, told a congressional hearing that he stood by the decision, and last week he said that he has not had any contact with the White House following the president's tweet. The merger was first inked in May 2017, and the transaction almost immediately became a focus of a lobbying battle in D.C. As Sinclair defended the transaction as necessary consolidation in the face of competition from cable and tech, opponents waged social media campaigns. Some other conservative news outlets, like Newsmax, The Blaze and One America News Network, publicly opposed the transaction. Claire Atkinson contributed reporting.<doc-sep>UPDATED with Sinclair share buyback, comment on merger ending. Tribune Media released details of its lawsuit against Sinclair Broadcast Group. saying it is seeking $1 billion from the local TV station owner due to its “belligerent and unnecessarily protracted negotiations” with regulators, which it says doomed the $3.9 billion deal. The harshly worded complaint (read it HERE) was filed in Delaware Chancery Court this morning, as Tribune announced it was terminating the plan to merge. The complaint bristles with indignation over the alleged conduct of Sinclair, long known as a sharp-elbowed organization that has grown into a national power from a single Baltimore radio station. “From virtually the moment the Merger Agreement was signed, Sinclair repeatedly and willfully breached its contractual obligations in spectacular fashion,” the suit says. “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 negotiations with DOJ and the FCC over regulatory requirements, refused to sell stations in the ten specified markets required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay – all in the service of Sinclair’s self-interest and in derogation of its contractual obligations.” Related Story Judge Rules Michael Shamberg's Case Against Film Academy Can Proceed, At Least For Now The blistering complaint continues, “Sinclair repeatedly favored its own financial interests over its contractual obligations by rejecting clear paths to regulatory approval. Instead, 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.” Sinclair called the suit “meritless” and, in a separate move, implemented a stock buyback of up to $1 billion. “It is unfortunate that Tribune Media Company terminated our merger agreement,” CEO Chris Ripley said. “Nonetheless, we strongly believe in the long term outlook of our company and disagree with the market’s current discounted view on our share price.” The Tribune-Sinclair tie-up was first announced in May 2017, following a four-year period during which Tribune had emerged from bankruptcy and separated its print and broadcast assets. Its portfolio of 42 local TV stations as well as assets such as the WGN America cable network, were viewed as attractive and will likely remain so given the company’s consistent financial performance of late. Regulators, which seemed poised to flash the green light for the deal in 2017, suddenly soured on it in recent months. Ajit Pai, the Republican FCC chairman appointed by President Donald Trump, abruptly flagged “serious concerns” about the divestitures of stations by Sinclair and referred the case to an administrative law judge, effectively killing the deal. Trump later tweeted his disappointment that the merger appeared unlikely to get approved.<doc-sep>
Tribune Media Co said on Thursday it had terminated a $3.9 billion deal to be acquired by Sinclair Broadcast Group and was suing Sinclair for breach of contract, after regulators objected to the acquisition that was supported by U.S. President Donald Trump. Tribune filed the lawsuit against Sinclair, the largest U.S. broadcast station owner, alleging material breach of contract over its failure to win over regulators 15 months after the merger was first announced. Tribune seeks about $1 billion of lost premium to Tribune's stockholders and additional damages in an amount to be proven at trial, according to a copy of the lawsuit filed in Delaware. The deal's termination, which holds back Sinclair's efforts to dramatically expand, comes after criticism by Democrats and public advocacy groups over whether the merger was in the public interest. It also follows a significant blow from the Republican-led Federal Communications Commission last month, when it questioned Sinclair's candor over the planned sale of some stations. The FCC said Sinclair did not "fully disclose facts" about the planned sale of three stations, including pre-existing business relationships between the company and prospective buyers. It also said the $60 million purchase price for Tribune's WGN-TV in Chicago "appeared to be significantly below market value." Sinclair shares sank nearly 4 percent to $26.02 in early trading, while Tribune climbed 2.7 percent to $34.55. "To maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements," Tribune said. "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." Sinclair said in a statement that "we unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency," adding that "as for Tribune's lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction." FCC Chairman Ajit Pai has been vocal in his opposition to the deal, a stance that was criticized by Trump. "So sad and unfair that the FCC wouldn't approve the Sinclair Broadcast merger with Tribune. This would have been a great and much needed Conservative voice for and of the People," Trump said in a Twitter post in July. Advocacy group Free Press said in an FCC filing in August 2017 that Sinclair forces its TV stations to "air pro-Trump propaganda and then seeks favors from the Trump administration." The group praised Tribune's announcement Thursday. Pai told Congress after Trump's tweet that he stood by his decision to refer the issue to a hearing. The FCC declined to comment on Thursday. Sinclair, which owns 192 stations, said in May 2017 that it planned to acquire Chicago-based Tribune's 42 TV stations in 33 markets.