Tribune Suing Sinclair For $1 Billion+
Tribune Media, which on Thursday withdrew from its $3.9 billion buyout by Sinclair Broadcast Group, is suing Sinclair for “approximately $1 billion of lost premium to Tribune’s stockholders and additional damages in an amount to be proven at trial.”
Shares of Sinclair slid more than 4% at the opening bell.
In its complaint filed in the Chancery Court in Delaware, Tribune claimed that Sinclair used “unnecessarily aggressive and protracted negotiations” with the Department of Justice and the FCC over regulatory requirements and that it refused to sell the stations it needed to in order for regulatory approval.
In the filing, Tribune said: “Beginning in November 2017, DOJ repeatedly told Sinclair that it would clear the merger if Sinclair simply agreed to sell stations in the 10 markets the parties had identified in the merger agreement. DOJ’s message to Sinclair could not have been clearer: if Sinclair agreed to sales in those 10 markets, ‘We would be done.’
“DOJ’s demand was neither unexpected nor draconian,” Tribune continued. “It overlapped entirely with what Sinclair had already committed to do in the merger agreement. Yet Sinclair refused, deciding instead to antagonize DOJ officials, including by accusing the Assistant Attorney General of the Antitrust Division — the highest ranking official in that division — of ‘completely misunderstand[ing]’ the broadcast industry and being ‘more regulatory’ than any recent predecessor.
“In meetings with DOJ,” Tribune continued: “Sinclair invited litigation over station divestitures, summarizing its position to DOJ in two words: ‘sue me.’
“Indeed, Sinclair went so far as to threaten to file its own lawsuit against DOJ. This was the polar opposite of what Sinclair had promised under the merger agreement when it agreed to proffer the identified station divestitures to avoid even a threat of litigation with regulators.”
Tribune said it warned Sinclair “repeatedly over many months that its refusal of DOJ’s demands constituted a breach of its obligations under the merger agreement. Sinclair repeatedly ignored Tribune’s admonitions and refused even to respond substantively.”
Sinclair had wanted the Tribune’s 42 TV stations and had initially agreed to dump almost two dozen of its own to win approval by the FCC. The media company which has enjoyed the support of President Donald Trump appeared to be cruising toward approval by U.S. regulators.
Last month, however, FCC Chairman Ajit Pai said that he had “serious concerns” about the deal, saying that Sinclair might still be able to operate the stations “in practice, even if not in name.”
Tribune’s complaint alleges “Sinclair’s material breaches were willful breaches of the merger agreement, because they were deliberate acts and deliberate failures to act that were taken with the actual knowledge that they would or would reasonably be expected to result in or constitute a material breach.
“As a result of Sinclair’s breaches, Tribune has sustained financial harm and has lost the expected benefits of the merger agreement.”
In a statement, Sinclair President-CEO Chris Ripley said: “We are extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination. We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency.
“As Tribune, however commented, in their belief, the FCC’s recent designation of the deal for a hearing in front of an Administrative Law Judge would have resulted in a potentially long and burdensome process and, therefore, pursuing the transaction was not in the best interest of their company and shareholders. As for Tribune’s lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction. The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.
“Nonetheless, we wish to thank both our and Tribune’s employees and our many advisers who have committed a tremendous amount of time and effort over the past 15 months towards the acquisition of Tribune. It is unfortunate that those efforts have not been realized. The combined company would have benefited the entire broadcast industry and the public through the advancement of ATSC 3.0, increased local news and enhanced programming.”