Spin Offs Likely In Sinclair-Tribune Deal

In filings seeking approval of Sinclair’s $6.6 billion takeover of Tribune Media, the parties say Sinclair may have to divest stations in as many as 10 markets from Seattle to Des Moines to comply with the FCC’s local ownership rules.

Acknowledging that the merged company will exceed the FCC’s current national ownership audience coverage cap (39% of TV homes) by around 6.5%, the parties also say Sinclair may have to sell all stations in some markets to get below the cap.

“To the extent that divestitures may be necessary, applications will be filed upon locating appropriate buyers and signing appropriate purchase agreements,” the parties say.

The parties also say that the need to divest stations may change if the FCC goes ahead with its plans to relax the ownership rules.

The filings became public yesterday.

Early last month, Sinclair announced that it would scoop up Tribune Media for $3.9 billion in cash and the assumption of $2.7 billion in debt, creating a TV station behemoth with more than 233 stations in 108 markets including 39 of the top 50 and a reach of 72% of U.S. TV homes.

(The number of stations may fall if it has to go ahead with FCC-mandated divestitures or if the FCC denies requests to retain Tribune’s satellite stations and “failing” stations.)

The parties contend in the filings that the deal is in the public interest.

“[It]will increase the merged company’s capability to serve the public by increasing its operational efficiencies, allowing Sinclair to upgrade the stations’ facilities, expand the stations’ local coverage (including local news), offer even greater value to multichannel video distributors, and increase syndicated and original programming offerings.”

The local rules allow ownership of two stations in a market, but only if one is not among the market’s top four rated and the market has eight other independently owned stations.

The parties identify 10 “overlap” markets where both Sinclair and Tribune now own stations in a way that would violate the local rules and may trigger the need for divestitures.

They are Seattle; St. Louis; Portland, Ore.; Salt Lake City; Oklahoma City; Greensboro, N.C.; Grand Rapids, Mich.; Harrisburg, Pa.; Richmond, Va.; and Des Moines, Iowa.

(The filing notes that Sinclair also owns two AMs and two FMs in Seattle, but that their ownership does not run afoul of the TV-radio crossownership rule.)

The filing notes that there are two other overlap markets, Washington and Milwaukee, where Sinclair would end up with duopolies. But the parties say that both duopolies are within the bounds of the rules.

In Washington, Sinclair owns WJLA and Tribune has WDCW, but WDCW is not top-four rated. In Milwaukee, Sinclair owns WVTV and WCGV and Tribune owns WITI. But Sinclair sold WCGV in the incentive auction and WVTV is not top-four rated.

The parties also ask the FCC to allow Sinclair to keep Tribune’s existing satellites (full-power stations that extend the signals of others stations) in Indianapolis and Denver and Tribune’s existing duopolies involving so-called failing stations in Ft. Smith-Fayetteville, Ark., and Hartford-New Haven, Conn.

In Ft. Smith, Tribune operates KFSM and failed station KXNW. In Hartford, it has WTIC and failed station WCCT.

To get a failed station waiver to operate a duopoly, the failed stations must meet criteria, including that the station has low viewership, is in poor financial shape and unable to attract a buyer who would operate the station on its own. The filings make such a showing for KXNW and WCCT.