Tribune Media has officially terminated its $3.9 billion merger deal with Sinclair Broadcasting, and the company filed suit on Thursday against Sinclair for breach of contract.
Tribune is seeking compensation for all losses it incurred during the merger process. The company is accusing Sinclair of engaging in unnecessarily aggressive and protracted negotiations with the U.S. Justice Department and the FCC over regulatory requirements, refusing to sell stations in the markets as required to obtain approval, and proposing aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay.
"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 Tribune Media CEO Peter Kern in a statement. "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."
Tribune’s decision on Thursday comes after last month the FCC referred the Sinclair-Tribune merger deal to a hearing with an administrative law judge. FCC Chairman Ajit Pai voiced concerns over some of Sinclair’s proposed station divestitures.
“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction. The evidence we’ve received 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,” Pai said.
Sinclair withdrew from the FCC its application to acquire Tribune and asked that the hearing being terminated.
"We are extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination," said Sinclair CEO Chris Ripley in a statement. "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."
The company also pushed back against the Tribune lawsuit, which is seeking $1 billion in damages.
"The lawsuit described in Tribune's public filings today is entirely without merit, and we intend to defend against it vigorously," Ripley said.
During an earnings call today, Kern said the regulatory environment was not to blame for the Sinclair merger failure and that Tribune is still open to consolidation and M&A. Kern said that, notwithstanding Tribune’s disappointment regarding the outcome of the transaction, the company is still happy with its quarterly results.
Tribune’s consolidated adjusted EBITDA grew 69% year-over-year despite net core advertising revenues falling 6%. Still consolidated revenue grew 6% when excluding the impact of barter revenues, led by growth in retransmission and carriage fee revenues and political advertising revenue.
This article was updated to include a statement from Sinclair.