Sinclair Broadcast Group Inc.'s bid to become a nationwide broadcast powerhouse collapsed as Tribune Media Co. withdrew from a planned merger that drew the ire of federal regulators who questioned Sinclair's honesty.
Tribune announced its withdrawal from the $3.9 billion transaction in a emailed statement Thursday. Tribune said it has filed a lawsuit in the Delaware Chancery Court against Sinclair seeking compensation for losses incurred as a result of "Sinclair's material breaches" of the merger agreement.
The Federal Communications Commission on July 18 sent the deal to a hearing by the agency's administrative law judge, citing possible misrepresentations or lack of candor in some proposed station divestitures. Hearings can take months, and the prospect of enduring one killed previous deals.
"This uncertainty and delay would be detrimental to our company and our shareholders," Tribune Chief Executive Officer Peter Kern said in the statement.
The FCC order asked whether Sinclair was in fact the hidden buyer in a proposal to sell Chicago's WGN-TV to a Maryland automobile executive with no prior broadcast experience, and ties to Sinclair management. The agency also questioned links between the Maryland-based broadcaster and a buyer proposed for stations in Dallas and Houston.
The FCC asked the judge to decide whether "Sinclair engaged in misrepresentation and/or lack of candor in its applications" and asked whether Sinclair had "attempted to skirt the commission's broadcast ownership rules."
Sinclair proposed the deal in May 2017, testing federal ownership limits with the plan to purchase 42 stations, including outlets in New York, Chicago and Los Angeles. The transaction would have left Sinclair with more than 200 stations. It's already the largest U.S. broadcaster by number of stations, with 192.