Tribune has called off its deal with Sinclair  and said it would sue its would-be acquirer for breach of contract — terminating a merger that would have built a conservative broadcast giant to compete with Fox News. 

The $3.9bn deal would have combined two of the biggest owners of local television stations in the US, as part of a move towards consolidation after regulators last year loosened the rules around ownership of TV channels.

But Sinclair’s acquisition had become increasingly imperilled in recent weeks after the Federal Communications Commission referred the deal for legal review, incurring the wrath of the US president who had been a vocal supporter of the acquisition.

In the lawsuit, Tribune accused Sinclair of “unnecessarily aggressive and protracted negotiations” with government and regulators. 

Lobby groups such as the American Civil Liberties Union had slammed the merger, arguing it would “virtually guarantee less viewpoint diversity in local news”. Sinclair, seeking to assuage regulator’s concerns, agreed to sell nearly two dozen television stations this year. But the FCC questioned whether these sales were “sham transactions”

Peter Kern, Tribune Media’s chief executive, said on Thursday that “our merger cannot be completed within an acceptable timeframe, if ever.”

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

210 stations

Combined total of TV stations under control in a Sinclair-Tribune merger, before disposals

Tribune alleges that Sinclair “refused to sell stations in the markets as 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”.

A Sinclair spokesperson did not immediately respond to a request for comment. After the FCC had called the deal into question, Sinclair said it had been transparent about the structure of the proposed station sales and was prepared to resolve any issues to complete the acquisition.

By purchasing Tribune Media, Sinclair Broadcast Group would have gained access to stations in some of the larger US media markets including Los Angeles, New York and Chicago. They would have complemented Sinclair’s much bigger portfolio, presently counting more than 170 stations to Tribune’s 40-odd, which are concentrated in small and midsized markets across the country. 

But sales were required in markets where Sinclair would have owned two “full power” stations, which is prohibited under current Federal Communications Commission rules. A deal was struck  with 21st Century Fox to sell around 10 stations in January.

In July, the head of the FCC Ajit Pai said he was referring the Sinclair-Tribune deal to an administrative judge, who would review the proposed station sales, because of “serious concerns” about the takeover. Mr Pai said in a statement at that time that the evidence received by the regulator “suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law.”

Donald Trump had previously criticised the FCC’s decision to refer the deal for review. He said last month that it was “so sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune” and compared it to agency’s 2011 decision to allow NBC’s takeover of Comcast. “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!” 

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