Tribune and Sinclair Deal Goes Kaput and to Court

The $3.9 billion proposed merger between Tribune Media and Sinclair Broadcast Group blew up in spectacular fashion yesterday when Tribune backed out of the deal; Tribune also sued Sinclair for allegedly breaching the merger contract between the two companies.

Sinclair owns 192 TV stations and Tribune owns 42 stations. According to the Inside Towers database, Tribune owns seven towers. The tallest, built in 1985, is located in Figure Five, AR and is 1,173 feet AGL. The second-tallest, built in 1957, is in Trafalgar, IN and is 1,132 feet AGL. The shortest, built in 2014, is located in Golden, CO and 375 feet AGL. Inside Towers contacted Tribune to determine whether the towers had been part of the Sinclair deal.

Speaking to analysts yesterday as Tribune released its Q2 financials, CEO Peter Kern said Sinclair was contractually obligated “to use their best efforts to get this deal closed ASAP.” They violated this obligation in “spectacular fashion,” he said, quoting the complaint filed in Delaware Chancery Court. In the 62-page complaint, Tribune tells the court it has sustained “financial harm” and lost the expected benefits of the merger agreement; It seeks about $1 billion of lost premium to Tribune’s stockholders and additional damages “in an amount to be proven at trial.

“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,” alleges Tribune in the complaint. It continues to state: “Sinclair’s entire course of conduct has been in blatant violation of the merger agreement and, but for Sinclair’s actions, the transaction could have closed long ago.”

Kern said once the FCC turned over the review to its Administrative Law Judge, Tribune realized “our merger cannot be completed within an acceptable timeframe, if ever.” Under the terms of the agreement, either Tribune or Sinclair had the right to call off the merger without paying a termination fee if it was not completed by August 8.

In response, Sinclair Broadcast Group President/CEO Chris Ripley said the company is “extremely disappointed” to be announcing the termination of the deal “after 15 months” of trying to close the transaction. The company withdrew its application to acquire Tribune at the FCC and asked the ALJ to terminate the hearing. He stressed that Sinclair did not mislead the Commission about the deal. Acknowledging that an ALJ hearing “would have resulted in a potentially long and burdensome process,” Ripley stated going ahead with the merger under the circumstances was not in the best interest of the company nor its shareholders.

As for the breach of contract allegations from Tribune, Ripley stated: “We fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction. The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.”

August 10, 2018

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