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21st Century Fox in Talks With Sinclair to Buy Tribune-Owned Fox Affiliate Stations

21st Century Fox and Sinclair Broadcast Group are in talks for a deal that calls for Fox to acquire a number of TV stations now owned by Tribune Media.

The complicated deal is part of Sinclair’s efforts to secure regulatory approval from the FCC and Justice Department for its $3.9 billion acquisition of Tribune Media. Sinclair has cited in its filings with the FCC on the deal 10 markets where it expects to divest stations in order to comply with the FCC’s station ownership rules. Those markets, which include Denver and Seattle, match up nicely with Fox’s renewed interest in acquiring more local affiliate stations in mid-sized markets, especially those in cities with NFL teams.

Now that 21st Century Fox is selling the bulk of its entertainment and cable assets to Disney, the remaining Fox entity will be far more focused on the broadcast network. Sinclair’s acquisition of Tribune will give Sinclair an even bigger hold on Fox’s broadcast distribution in a vast section of the country. So it’s no surprise that Fox would pounce on the chance to buy stations that Sinclair has to sell under regulatory pressure.

A sign that Sinclair and Fox were working on a deal came on Jan. 1, which marked the expiration of Fox affiliation agreements for a number of Sinclair-owned stations. The sides quietly agreed to an extension with no public saber-rattling. Industry insiders were watching that situation amid speculation of rising tensions between Fox and Sinclair as the Tribune acquisition strengthens Sinclair’s bargaining hand with the network. The Tribune acquisition will expand Sinclair’s footprint as the nation’s largest TV station owner by far, with more than 200 channels reaching more than 70% of U.S. TV households.

Sources said there has been much discussion between Fox and Sinclair on how to structure the transaction, with the sides leaning toward a three-way pact between Fox, Sinclair and Tribune that would be submitted to regulators as addressing the need for divestitures. Sources said it is not yet clear if Fox is up for buying stations in each of the 10 markets. FCC movement on the Sinclair-Tribune review is expected this month as Jan. 17 marks the end of the FCC’s 180-day review timeline for deal, which was announced in May.

The markets Sinclair has identified for divestitures are: Seattle, St. Louis, Salt Lake City, Oklahoma City, Okla., Greensboro/Winston-Salem, N.C., Grand Rapids, Mich., Harrisburg, Pa., Richmond, Va., Des Moines, Iowa, and Portland, Ore. Tribune at present owns Fox affiliates in Seattle, Denver, St. Louis, Salt Lake City, Grand Rapids, Greensboro, and Harrisburg.

Sources said the talks have also touched on markets outside of Sinclair’s immediate divestiture needs, including the Tribune-owned Fox affiliates in Cleveland and San Diego. Fox is unlikely to want stations in smaller markets.

Reps for Sinclair, Fox and Tribune declined to comment. The Financial Times reported Wednesday on the negotiations between Fox and Sinclair.

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