The prospect of Sinclair Broadcast Group completing its proposed $3.9-billion acquisition of Tribune Media appears to be fading fast.
The Federal Communications Commission, which has to approve the sale of Tribune’s 42 TV stations, on Thursday detailed its concerns with the legality of the deal.
The commission’s order questions whether Sinclair engaged in a “lack of candor” to get its proposed deal to comply with the national TV station ownership cap.
“Based upon the record before us, we are unable to find that grant of this transaction would be consistent with the public interest,” the commission’s order said.
The findings in the FCC’s order will go to a judge for review.
After the commission’s order was released, Chicago-based Tribune Media issued a statement calling it “troubling,” and indicated that it may be ready to move on from the deal first agreed on in May 2017.
“We are currently evaluating its implications and assessing all of our options in light of today’s developments,” Tribune said in a statement. “We will be greatly disappointed if the transaction cannot be completed, but will rededicate our efforts to running our businesses and optimizing assets.”
Either party can exit after Aug. 7, according to people familiar with the terms of the deal. The breakup fee is $133 million.
Sinclair said in a statement Wednesday that it had been transparent in disclosing the terms of the divestitures to the FCC.
The FCC’s order said the three Tribune stations Sinclair planned to divest to achieve compliance — WGN in Chicago, KDAF in Dallas and KIAH in Houston — involved entities in which it has significant financial interest or business ties.
The order also said Sinclair’s sale price for the Chicago station — which carries the market’s leading sports properties and a morning news show that tops the major network programs in the ratings — is far below market value.
Sinclair proposed selling WGN to Steven Fader, the chief executive of Atlantic Automotive Group, for $60 million. Under the terms of the deal, Sinclair would have continued to operate nearly all aspects the station. Sinclair Chief Executive David Smith has a controlling interest in Atlantic and sits on its board of directors. Sinclair would have also remained in control of WGN’s sales, operations and programming.
Sinclair also has a business relationship with Cunningham Broadcasting, the proposed buyer of the Dallas and Houston stations.
After FCC Chairman Ajit Pai announced there were “serious concerns” about the nature of Sinclair’s divestitures, the company said it would amend the deal — keeping the Chicago station and finding new buyers for the Dallas and Houston outlets. But the FCC said it will not consider any amendments until the questions raised in the order are resolved by the court.