Ding, dong the deal is dead: Tribune Media has officially terminated its controversial and long-delayed merger with Sinclair Broadcast Group.
But wait, there's more: The Chicago-based parent company of WGN-Channel 9 and WGN 720-AM announced Thursday it was filing a lawsuit against Sinclair for breach of contract, claiming the Maryland-based company “engaged in unnecessarily aggressive and protracted negotiations” with the FCC.
It brings to an end the proposed $3.9 billion acquisition of Tribune Media’s 42 television stations and other properties that had been in regulatory limbo since May 2017. Last month the FCC effectively derailed the merger by accusing Sinclair of “misrepresentation and/or lack of candor” in its application.
A key point was the FCC’s concern over Sinclair’s scheme to sell WGN to an auto dealer connected to Sinclair chairman David Smith, while maintaining control over the station’s operations.
“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,” Peter Kern, Tribune Media CEO, 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.”
In an email to employees, Kern acknowledged that the move puts Tribune Media back on the market. “No doubt the rumor mill will begin anew with speculation about who might buy us or who we might buy or whether the regulatory landscape still favors consolidation,” he said.
No comment yet from Sinclair.
Here is the text of Kern’s email to Tribune Media employees:
Earlier this morning we announced the termination of our proposed merger with Sinclair and that we have filed a lawsuit against Sinclair for breach of contract—attached is the press release we issued a short time ago.
Given the developments of the last few weeks, and the decision by the Federal Communications Commission to refer certain issues to an administrative law judge in light of Sinclair’s conduct, it’s highly unlikely that this transaction could ever receive FCC approval and be completed, and certainly not within an acceptable timeframe. This delay and uncertainty would be detrimental to our company, to our business partners, to our employees and to our shareholders. Accordingly, our Board made the decision to terminate the merger agreement with Sinclair to enable us to refocus on our many opportunities to drive the company forward and enhance shareholder value.
As for the lawsuit, we are confident that Sinclair did not live up to its obligations under the merger agreement and we intend to hold them accountable. A suit like this does not get resolved overnight and it is the last thing you should be thinking about, but I want you to know that Tribune did everything it was supposed to do, and we will make sure we are treated fairly.
Right now, I am sure many of you are still absorbing the news and wondering what it means for our company, for our future, and most especially for each of you. I want to take a moment to answer these questions and address some of your concerns as we now re-adjust to the old normal of running our great and storied Tribune Media Company.
So, let’s begin there—Tribune Media remains as strong as ever, with great TV stations, important local news and sports programming, a re-energized and financially powerful cable network, and a terrific history of serving our viewers, our advertisers, and our MVPD and network partners. You need look no further than the exceptional financial results we released today for proof of that. Our consistent success is directly related to your talent, your experience, your innovation, and your willingness to give your best every day.
As for the future, we continue to live in complex times in the media world. New consumer habits, new entrants to the space, new competitors every day, and consolidation going on all around us. Rapid change has become the norm—it’s impossible to predict the next big thing. What I do know, though, is that we’ve got valuable assets, great people running them, and we remain one of the preeminent broadcasting companies in America.
No doubt the rumor mill will begin anew with speculation about who might buy us or who we might buy or whether the regulatory landscape still favors consolidation. We can’t do anything about such speculation. What we can do is rededicate ourselves to our own performance. Let’s shake off the cobwebs of deal distraction, ignore the outside noise, and continue delivering on our commitment to each other, to our customers, to our partners and to the communities we serve. If we do that, the rest will take care of itself.
Let’s get together for a companywide town hall meeting tomorrow at Noon ET. We’ll broadcast the meeting live to our business units, talk more about all these issues and take your questions—you can submit questions in advance of the meeting to: email@example.com. In the meantime, if you have any concerns, our HR team is ready to help; and Gary Weitman can handle any media inquiries you might get.
Thank you, again,