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Sinclair Revises Divestiture Plan to Save Tribune Merger, Denies Misleading FCC

Sinclair Broadcast Group has vowed to revise its station divestiture plan in an effort to salvage its $3.9 billion acquisition of Tribune Media.

Sinclair, in a lengthy statement issued Wednesday, has also strongly denied any effort to mislead the FCC. The company it was “shocked” earlier this week when FCC chairman Ajit Pai raised concerns about the legality of its plan to maintain operational control of the stations by selling them to entities with ties to Sinclair.

The revised plan calls for Sinclair to acquire Tribune’s WGN-TV Chicago as part of the larger transaction. Sinclair is proposing that Tribune-owned stations in Dallas (KDAF-TV) and Houston (KIAH-TV) will be put into a divestiture trust and sold in an arm’s length transaction by an independent trustee after the Tribune sale is closed.

Sinclair said its conversations with “sources at the FCC” indicated those three stations were the focus of Pai’s concern. On Monday, Pai began the process of sending Sinclair’s divestiture plan to a judge for an administrative review hearing. That promised to prolong the regulatory review process of the merger agreement struck in May 2017. It’s unclear if Sinclair’s latest proposal will clear the path for a sign-off on the deal by the FCC and Justice Department.

Pai has the votes to send the merger to an administrative hearing, but the actual order had yet to be finalized as of Tuesday. A fourth commissioner, Michael O’Rielly, said that he wanted language included to set a timeframe for the review. An FCC spokesman said that they had no immediate comment on Sinclair’s latest statement.

Commissioner Brendan Carr, appearing at the event on Wednesday at the D.C. law firm Wiley Rein, said that he agrees “100%” with the order to send the merger to an administrative hearing. He said that he read press reports about Sinclair’s latest divestiture plan. “There’s nothing I have seen at this point that changes my mind,” he said.

The Sinclair-Tribune deal has stirred opposition from many quarters given that it would make Sinclair by far the nation’s largest TV station owner with more than 200 stations under one roof.

“While we understand that certain parties, which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, at no time have we withheld information or misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition,” Sinclair spokesman Ronn Torossian said. “Any suggestion to the contrary is unfounded and without factual basis.”

Sinclair’s divestiture plan for the deal has raised hackles from the start. Initially, the company planned to sell WPIX-TV New York and WGN-TV at below-market prices to entities with ties Sinclair. In April, Sinclair revised that plan, deciding to keep WPIX but sell WGN-TV, KDAF and KIAH to Cunningham Broadcasting, which has ties to Sinclair executives.

Sinclair has identified a total of 23 stations that will be sold to comply with federal TV station ownership rules. Sinclair already has an agreement to sell nine medium-sized market stations to Fox Television Stations after the Tribune deal closes. Fox is unlikely to be a contender for the Dallas or Houston stations because it already owns two stations in both of those markets.

Public interest group Free Press, which has been running a campaign opposing the deal, found the latest Sinclair plan unconvincing. It’s president, Craig Aaron, said that “Sinclair’s latest minor makeover of its mega-merger with Tribune doesn’t look any better for the American public. This company has been misleading the FCC for years with front groups and shady arrangements to control local TV stations, undercut competition and evade FCC rules.

He added, “Chairman Ajit Pai did the right thing on Monday when he put the brakes on this deal. He has the bipartisan support of his colleagues, and should release the order he circulated now that he has enough votes to adopt it.”

Here is Sinclair’s full statement:

Sinclair Broadcast Group is amending certain previously announced divestitures pursuant to the Tribune Media Company plan of merger.  While neither Sinclair or Tribune have seen the draft HDO, Chairman Pai’s comments and discussions with sources at the FCC firmly indicate the FCC is questioning the proposed divestitures in Dallas, Houston and Chicago. 

Accordingly, in order to address such concerns and to expedite the Tribune transaction, Sinclair has withdrawn the pending divestitures of stations in Dallas (KDAF) and Houston (KIAH) to Cunningham Broadcasting Corporation and Tribune has withdrawn the pending divestiture of WGN in Chicago to WGN-TV LLC.  Sinclair intends to request permission from the FCC to put the Dallas and Houston stations into a divestiture trust to be operated and sold by an independent trustee following the closing of the Tribune acquisition.  As a result of the withdrawal of the application relating to WGN, Sinclair will simply acquire that station as part of the Tribune acquisition, which is, and has always been, fully permissible under the national ownership cap.

Throughout the FCC review process of the Tribune merger and divestitures, Sinclair has had numerous meetings and discussions with the FCC’s Media Bureau to make sure that they were fully aware of the transaction’s structure and basis for complying with FCC rules and meeting public interest obligations. During these discussions and in our filings with the FCC, we have been completely transparent about every aspect of the proposed transaction. We have fully identified who the buyers are and the terms under which stations would be sold to such buyer, including any ongoing relationship we would have with any such stations after the sales. All relevant agreements documenting such terms as required by FCC rules have been filed. While we understand that certain parties, which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, at no time have we withheld information or misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition. Any suggestion to the contrary is unfounded and without factual basis.

While the structures put forth to the FCC throughout the process have all been in compliance with law and consistent with structures that Sinclair and many other broadcasters have utilized for many years with the full approval of the FCC, we have consistently modified the structure in order to address any concerns raised by the FCC. As a result and in light of the ongoing and constructive dialogue we had with the FCC during the past year, we were shocked that the concerns being raised now are being raised for the very first time. Nonetheless, we have decided to move forward with these additional changes to satisfy the FCC’s concerns.

There can be no question regarding misrepresentation or character given that Sinclair has fully disclosed every term of all aspects of the transactions it has proposed. There can be no question that the FCC’s concerns with sales to certain parties have been eliminated in light of the withdrawals of the applications relating to Dallas, Houston and Chicago. Accordingly, we call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process and to provide certainty to the thousands of Tribune employees who are looking for closure.

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