Sinclair Reverses Course on Tribune Deal, Hoping to Win FCC Nod

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Sinclair Broadcast Group Inc said on Wednesday it will reverse course and not divest three television stations in hopes of winning approval of its $3.9 billion acquisition of Tribune Media Co after the Federal Communications Commission chairman said he had “serious concerns” about the deal.

Sinclair, the top U.S. TV broadcast group, said it will drop plans to divest stations in Dallas, Chicago and Houston to “expedite” the transaction after the FCC suggested that under its plan the company would still control the stations.

It is not clear if the last-ditch effort will be enough to sway regulators, who also raised concerns about whether Sinclair has misled the government.

The Justice Department is also still reviewing the deal and the FCC may have other concerns before it is willing to approve the deal.

FCC chairman Ajit Pai, whom Democrats have accused of making a string of decisions benefiting Sinclair, said Monday that evidence suggested “certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law.”

Sinclair, which owns 192 stations, is withdrawing applications to divest stations in Dallas, Houston and Chicago. Reuters first reported on Monday the identity of the three stations.

A majority of the FCC voted Monday to approve a draft order circulated by Pai’s office to refer the matter to an administrative judge for a hearing, Tribune said.

Sinclair said it was “shocked and disappointed” by the FCC’s order and denied it was not in compliance with FCC rules or that it had engaged in misleading conduct.

The company said it believed it can now win quick approval. “We call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process,” Sinclair said in a statement.

The FCC declined to comment.

A hearing is likely to result in a lengthy delay and could effectively kill the deal, as has happened in other mergers referred for administrative proceedings. Sinclair now hopes the hearing will not be needed.

The draft order circulated by Pai’s office, part of which was seen by Reuters, said Sinclair’s actions around the divestiture of TV station WGN in Chicago “potentially involve deception” and “includes a potential element of misrepresentation or lack of candor.”

The draft said the matter must be resolved before the FCC gives the go-ahead.

Sinclair said it will seek permission to acquire WGN in Chicago instead of divesting it. The company had proposed to sell the station to a Maryland auto dealer who is a longtime business associate of Sinclair Executive Chairman David Smith, and would largely continue to operate the station under a services agreement.

Sinclair also said it was withdrawing plans to sell stations in Dallas and Houston to Cunningham Broadcasting Corp, a company controlled by the estate of Smith’s mother. Sinclair said Wednesday it now wants to put the two Texas stations into a divestiture trust to be sold and operated by an independent trustee.

Tribune shares rose 1.7 percent on Wednesday while Sinclair was down 2.6 percent.

Sinclair said in May 2017 it planned to acquire Chicago-based Tribune’s 42 TV stations in 33 markets.

In April, Sinclair said it would sell 23 TV stations to obtain regulatory approval. It needs FCC permission to own more than one station in some markets. (Reporting by David Shepardson; Editing by Franklin Paul and Jeffrey Benkoe)

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