Tribune Media files suit, terminates Sinclair tie-up deal

By David Shepardson

(Reuters) - Tribune Media Co terminated its $3.9 billion deal to be acquired by Sinclair Broadcast Group and filed suit, the company said on Thursday, after regulators objected to the acquisition that had received support from U.S. President Donald Trump.

Tribune filed a lawsuit against Sinclair, the largest U.S. broadcast station owner, alleging material breach of contract 15 months after the merger was first announced.

"To maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements," Tribune said.

"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," the company said.

The Federal Communications Commission (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."

FCC Chairman Ajit Pai has been vocal in his opposition to the deal, a stance that was criticized by Trump.

"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 Twitter post in July.

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."

Pai told Congress after Trump's tweet that he stood by his decision to refer the issue to a hearing.

Sinclair, which owns 192 stations, said in May 2017 that it planned to acquire Chicago-based Tribune's 42 TV stations in 33 markets in a deal that would significantly expand its reach.

Sinclair did not immediately comment on Thursday, but said last month "at no time have we withheld information or misled the FCC in any manner whatsoever."

The FCC voted last month to refer the proposed merger to an administrative law judge to review questions about Sinclair's candor, a move that analysts had then said would likely lead to the deal's collapse.

"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 time frame, if ever," said Tribune Media Chief Executive Officer Peter Kern.

"This uncertainty and delay would be detrimental to our company and our shareholders."

Kern told employees in an email reviewed by Reuters that it was not clear what was next for Tribune.

"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," he wrote.

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

Pai's statement raising questions about whether Sinclair would continue to control some of the stations it proposes to divest followed similar questions raised in separate filings by the American Civil Liberties Union and conservative news outlet Newsmax Media.

The FCC did not immediately comment on Thursday.

(Reporting by Arjun Panchadar in Bengaluru and David Shepardson in Washington; Editing by Saumyadeb Chakrabarty and Bernadette Baum)