An attempt by two leading media firms to join the consolidation wave sweeping the industry failed this week, days after shareholders approved the much-awaited Disney-Fox deal. Tribune Media (TRCO) walked out of a previously announced agreement to be acquired by rival Sinclair Broadcasting Group (SBGI) after the latter violated the contract and failed to abide by regulatory rules.
The merger had been in trouble ever since Sinclair slipped under the radar of government agencies for suspected association with the Trump administration. Its fate was almost sealed when the Federal Communications Commission called for a detailed scrutiny last month. The final blow came after the agency took exception to Sinclair’s recent asset sales to parties closely associated with it, terming the transactions a ‘sham.’ Later, Tribune’s board unanimously voted the decision to terminate the agreement Wednesday, the first day the company was allowed to do so.
The fate of the deal was almost sealed when the Federal Communications Commission called for a detailed scrutiny last month
Experts are of the view that both the parties stand to lose badly from the termination of the near-$4-billion deal. Had the merger materialized as per the original agreement, the synergies would have boosted earnings and market share of the combined entity. It would have particularly benefitted from the vast network of TV stations run by Sinclair, the largest broadcast station owner in the country.
Angered by Sinclair’s unwarranted ‘aggression’ while negotiating with the regulatory agencies, including its refusal to sell certain key assets that would have saved the deal, Tribune has filed a lawsuit against Sinclair.
“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,” stated a communiqué from Tribune. Recently, the Commission’s action had invited criticism from President Donald Trump, who said it was unfair on the part of the FCC to deny approval for the takeover.
Since the deal has been scrapped, Tribune is expected to look for another buyer. According to industry sources, a potential buyer is 21st Century Fox (FOXA) led by Rupert Murdoch, who will continue to own the company’s broadcast and news networks after its proposed takeover by Walt Disney Company (DIS).
Tribune shares gained nearly 4% during the early trading hours Thursday, continuing the uptrend started Wednesday. Meanwhile, Sinclair’ stock has been trading lower since the market opened.