Tribune terminates merger agreement with Sinclair, files suit for breach of contract

Yolanda Curtis
August 10, 2018

The $3.9 billion buyout of Tribune Media by Sinclair collapsed Thursday, ending a bid to create a massive media juggernaut that could have rivaled the reach of Fox News.

Tribune Media is the parent company of WREG News Channel 3 in Memphis.

Tribune's move to kill the merger comes three weeks after the Federal Communications Commission voted unanimously against approving Sinclair's proposed acquisition of Tribune Media.

According to Tribune, Sinclair committed to use reasonable best efforts to obtain regulatory approval as promptly as possible, instead, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission over regulatory requirements. On Thursday, Kern said that any further delays would hurt his company - so the Tribune board made a decision to spike the deal.

Under the terms of the deal, Tribune and Sinclair had the right to call off the merger without paying a termination fee if it was not completed by August 8.

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In July, the bid by Sinclair, a media outlet that had the vocal support of President Trump, appeared to be cruising toward approval by U.S. regulators.

Sinclair Broadcast Group, Department of Justice and FCC didn't immediately respond to requests for comment. The so-called sidecar agreement would have kept Sinclair essentially in charge of the Chicago station, with an option to buy it back for the same price within eight years.

On a conference call this morning, Kern told analysts that the company was disappointed the merger couldn't be consummated and said it had been a "huge undertaking" to assist Sinclair with trying to win approval for the transaction while maintaining steady operations at the company.

On Thursday, Kern said the FCC order, which has been the death knell for previous media mergers, was the final straw for Tribune Media.

Sinclair, a Maryland-based company which is the largest owner of local news stations in the US, is notorious for its right-wing, pro-Trump slant, and its unusual system of distributing slanted "must-run" content to its local stations to work into their broadcasts.

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"Sinclair repeatedly favored its own financial interests over its contractual obligations by rejecting clear paths to regulatory approval", the lawsuit alleges.

Sinclair had proposed some revisions to its divesture plan last month, but those terms left Sinclair in control of stations under scrutiny, including in Chicago.

In a press release, Tribune says "The lawsuit seeks compensation for all losses incurred as a result of Sinclair's material breaches of the merger agreement", going on to say...

Tribune Media on the hook for a $135 million breakup fee, according to the agreement reached previous year. But the road ahead remains uncertain for Tribune Media.

The Maryland company said Thursday in a prepared statement that the Tribune lawsuit is "entirely without merit". "Obviously, it tends to be even worse if the deal doesn't happen because you have to recover and recharge the engine".

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