Tribune Cancels Sinclair Buyout, Files $1 Billion Lawsuit

Tribune Broadcasting Los Angeles affiliate KTLA 5 is seen in Hollywood Los Angeles

Tribune Broadcasting Los Angeles affiliate KTLA 5 is seen in Hollywood Los Angeles

The FCC said in July Sinclair "did not fully disclose" facts about the merger, raising questions about whether the company had "attempted to skirt the commission's broadcast ownership rules" and would, in fact, actually control the stations Sinclair said it was divesting.

A sticking point for regulators at the FCC and the Justice Department was a series of side deals that Sinclair had proposed in order to bring the combined company into compliance with regulations on the number of local TV stations a company could own.

Tribune said it will sue Sinclair for breach of contract, arguing Sinclair's negotiations with the US Justice Department and FCC were "unnecessarily aggressive". "This uncertainty and delay would be detrimental to our company and our shareholders. and, by way of our lawsuit, intend to hold Sinclair accountable".

In the lawsuit filed Thursday in Delaware Chancery Court, Tribune Media alleges Sinclair breached its contractual obligations "in spectacular fashion" in a bid to maintain control of WGN-TV and other stations.

The company was admonished by media watchdogs in April after dozens of Sinclair news anchors read an identical script expressing concern about "one-sided news stories plaguing the country".

Sinclair has become a significant outlet for conservative views.

Advocacy group Free Press said in an FCC filing in August 2017 that Sinclair forces its stations to 'air pro-Trump propaganda and then seeks favors from the Trump administration'.

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"Tribune's decision to pull the plug on the Sinclair merger is great news for consumers who will avoid paying the higher pay-TV rates the deal would have caused", ACA CEO Matthew Polka said.

The FCC did not immediately comment on Thursday.

Tribune employees were notified that the deal was off in a lengthy early-morning memo from Kern that blasted Sinclair and said Tribune had done "everything it was supposed to do".

"We think that it is likely that another suitor will emerge for Tribune in the near-term", Kenneth Duffel, an analyst with KDP Investment Advisors, said in a note.

Kern said he would continue to run the company until Tribune reached a "permanent state".

The deal was worth $3.9 billion for Tribune Media and would have added more than 40 stations including KTLA in Los Angeles, WPIX in NY and WGN-TV in Chicago to Sinclairs list of local affiliates. The company already owned 173 stations in 81 markets. Sinclair defended the script as a way to distinguish its news shows from unreliable stories on social media. 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.

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