Sinclair Broadcast Group went to war with President Trump’s regulators, botching its deal with Tribune Media, according to an explosive lawsuit filed Thursday.
Tribune not only terminated its $3.9 billion sale to Sinclair but also sued the broadcast network for $1 billion, alleging it didn’t do enough to get regulatory approval.
Sinclair allegedly antagonized the administration even though Executive Chairman David Smith is known for having a close relationship with Trump.
During the US review, Sinclair accused Assistant Attorney General Makan Delrahim, who heads the antitrust division, of misunderstanding the broadcast industry and being more regulatory than any recent predecessor, according to the suit.
“Sinclair went so far as to threaten to file its own lawsuit” against the Justice Department, the suit alleges.
If Sinclair had moved forward, it would have likely asked for a declaratory judgment claiming the merger did not violate antitrust laws, according to an attorney.
The Justice Department told Sinclair, the largest local television station owner, with 192 channels in 89 markets, in November 2017 that if it sold stations in 10 markets, it would clear the Tribune acquisition, the suit says.
Under the merger agreement, Sinclair was required to sell stations in up to 10 markets if required by regulators. Sinclair never accepted the terms.
The Sinclair execs could fight the Justice Department and the Federal Communications Commission on the number of divestitures as long as it did not risk the deal being stopped or running past the Aug. 8 merger deadline, sources said.
FCC Chairman Ajit Pai on July 16 surprised Sinclair and essentially killed the deal.
Sinclair, in negotiations with the FCC, was not transparent regarding who was buying stations it was selling, the suit alleges.
For example, Sinclair did not disclose that Smith owned the controlling interest in WGN buyer Steven Fader’s car dealership company, or that WPIX buyer Cunningham Broadcasting’s controlling shares had been sold at a suspiciously low price only months earlier to a Sinclair associate with re-purchase options held by Smith’s family members.
These facts were not addressed by Sinclair to the FCC, the suit says, and were uncovered by deal foes.
The FCC said when stopping the merger, “This case includes a … lack of candor that may suggest granting other, related applications by the same party would not be in the public interest.”
Sinclair said in a press release, “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.
“The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.”
Tribune did not require a breakup fee in the deal if regulators stopped the merger but did have Sinclair’s sale guarantee, which would help it get the regulatory approval.
