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.”
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.