Tribune Media terminates merger with Sinclair, saying it will sue for ‘breach of contract’

Chicago-based Tribune Media Co (NYSE:TRCO) announced Thursday that it would withdraw from its US$3.9bn merger with Sinclair Broadcast Group Inc (NASDAQ: SBGI), adding it would sue Sinclair for “breach of contract” over its failed negotiations with regulators over the deal.

Tribune filed a lawsuit in the Delaware Chancery Court against Sinclair for breach of contract seeking compensation “for all losses incurred as a result of Sinclair’s material breaches” of agreement.

Sinclair had hailed the merger last year as the biggest acquisition in its history. However, the merger began to stumble last month after Federal Communications Commission Chairman Ajit Pai raised “serious concerns” about the deal.

The FCC said in July that Sinclair “did not fully disclose” facts about the merger, raising questions about whether the company “attempted to skirt the commission’s broadcast ownership rules.” The regulator said it would send the media deal for review by an administrative law judge, which is shorthand for a sign that a transaction may be blocked.

“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,” Tribune Media CEO Peter Kern said 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.”

Scope of the failed deal

The US$3.9bn deal would have given Sinclair, which already owns 192 stations, Tribunes 42 TV stations spawning a conservative broadcasting giant that some have described as “the biggest TV company in America.”

“It would have been a victory for conservative media in a turbulent political environment, in which Republican critics have alleged a systemic negative bias on college campuses and social media platforms,” reported The Washington Post.

Not surprisingly President Donald Trump immediately took to Twitter last month to pillory federal regulators for getting in the way of the planned merger.

READ: President Donald Trump blasts FCC for not approving Sinclair-Tribune merger

“So sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune. This would have been a great and much needed Conservative voice for and of the People,” Trump said in a July tweet.

Shares in the Sinclair Broadcast Group tumbled 3.1% to US$26.25 in premarket trade Thursday, while Tribune traded flat at US$33.75.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Story by ProactiveInvestors