UPDATED with information about planned FCC hearing: Two days after a stinging challenge to its pending Tribune Media acquisition from FCC chairman Ajit Pai, Sinclair Broadcast Group said it is amending its plans for station divestitures in a bid to salvage the deal.
Pai raised “serious concerns” about the so-called “sidecar” deals Sinclair had struck for stations in Dallas, Houston and Chicago. He felt those arrangements would enable Sinclair to continue running the stations it supposedly sold off, in defiance of regulatory directives. For example, WGN in Chicago would have been owned by a business associate of Sinclair chairman David Smith. The Republican FCC chairman said he would circulate a draft hearing designation order, or HDO, regarding the merger.
The FCC voted unanimously today to adopt the hearing designation order, which it will release publicly tomorrow.
The stocks of both companies have plummeted on the news, which threatens a $3.9 billion deal pending since May 2017. One core issue in the controversial merger is the reach it would give the combined company. For decades, owners were limited to having stations that collectively reach 39% of U.S. homes. The Sinclair-Tribune portfolio would reach 62%, but it started off well north of 70%, which attracted scrutiny, even though the FCC is also in the midst of reassessing the 39% cap.
Ties between Sinclair and President Donald Trump have intensified the controversy over the merger, whose views are often amplified in commentary segments that stations must air (some delivered by former Trump White House staffer Boris Epshtyn). Over the past year, Sinclair has found itself in the cross-hairs of late-night comedian John Oliver and featured in a viral video compilation of the company’s anchors reading scripted, suspiciously Trump-like “anti-fake-news” commentary.
Sinclair, which said it was “shocked” by the turn of events, has withdrawn the pending divestitures of stations in Dallas (KDAF) and Houston (KIAH) to Cunningham Broadcasting. Tribune has withdrawn the pending divestiture of WGN in Chicago to WGN-TV LLC.
The company said it intends to request permission from the FCC to put the Dallas and Houston stations into a divestiture trust to be operated and sold by an independent trustee. It will then find a third-party buyer or buyers for the Dallas and Houston stations. With WGN, it will now plan on acquiring it under the Tribune umbrella, an option the company said was “fully permissible” under FCC ownership guidelines.
“Throughout the FCC review process of the Tribune merger and divestitures, Sinclair has had numerous meetings and discussions with the FCC’s Media Bureau to make sure that they were fully aware of the transaction’s structure and basis for complying with FCC rules and meeting public interest obligations,” Sinclair said in its announcement. “During these discussions and in our filings with the FCC, we have been completely transparent about every aspect of the proposed transaction.
“We have fully identified who the buyers are and the terms under which stations would be sold to such buyer, including any ongoing relationship we would have with any such stations after the sales. All relevant agreements documenting such terms as required by FCC rules have been filed. While we understand that certain parties, which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, at no time have we withheld information or misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition. Any suggestion to the contrary is unfounded and without factual basis.”
Sinclair closed its announcement with an appeal to regulators. “We call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process and to provide certainty to the thousands of Tribune employees who are looking for closure,” the company said.