Sinclair/ Tribune Called Likely to Be OK; Opponents Say It's Against Public Interest
Sinclair buying Tribune is still considered likely to be approved, despite the expectation of an unfavorable U.S. Court of Appeals for the D.C. Circuit ruling on the UHF discount and lack of FCC action on the national ownership cap, analysts and attorneys told us Friday. The final stage of the transaction’s comment period ended Thursday, and opponents urged the FCC to reject the transaction as against the public interest. The FCC and DOJ are still seen likely to OK the transaction in some form. It’s not clear what the particulars will be or how soon, but the FCC is expected to approve, said Wells Fargo analyst Marci Ryvicker.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Though the transaction’s comment period is over, the FCC hasn’t restarted the frozen deal shot clock, said a spokesman.
It’s unlikely that Chairman Ajit Pai will reject Sinclair/Tribune as not being in the public interest because of issues of scale, given his past statements on the state of the media market and broadcast ownership, said broadcast attorneys. DOJ’s recent appeal of the AT&T/Time Warner court decision (see 1807130034">1807130034) could be seen as a negative indicator for Sinclair/Tribune, said S&P Global Senior Research Analyst Justin Nielson, but he called the appeal “posturing.” Broadcast attorneys and industry officials expect DOJ approval soon, and that could spur FCC action. The commission often rules on deals shortly after DOJ, the attorneys noted.
The FCC shouldn’t approve Sinclair/Tribune, said Newsmax CEO Christopher Ruddy in an interview. The deal’s divestitures are flawed and it would give Sinclair undue power, he said. Sinclair didn't comment.
Though more than a year since the announcement, Sinclair and Tribune are unlikely to nix it, Ryvicker said. The companies are expected to renew the proposed transaction before an upcoming Aug. 8 “walk away” deadline, she said. Tribune’s properties are unlikely to attract another buyer to pay as much as Sinclair, Ruddy said, and Ryvicker said Tribune would be unable to find another buyer at all. Sinclair’s stock would be improved by the deal, which makes killing the takeover unlikely, Ryvicker said. The deal is still worth it to Sinclair even if it can’t buy as much of Tribune as it originally planned, a broadcast attorney said. Sinclair CEO Chris Ripley said the deal could work under a 50 percent cap, Nielson noted (see 1806140055).
Replies in docket 17-189 universally condemned Sinclair/Tribune. “More than 90 percent of comments in this proceeding call on the Commission to deny the merger,” said National Association of Broadcast Employees and Technicians-CWA. “Sinclair and Tribune have failed to demonstrate that any purported merger-related benefits exceed the substantial public interest harms.”
Most replies focused on proposed divestiture arrangements. Sinclair/Tribune failed “to rebut evidence that a number of proposed ‘divestitures’ are in fact acts of self-dealing with no tangible public interest benefits,” said opponents including Ride TV, NTCA, Public Knowledge and the Sports Fan Coalition. Sinclair’s divestitures are “bogus” and being sold to “flagrant fronts,” said Herndon-Reston Indivisible. The divestitures include “low-balling” sale prices, said Common Cause, the United Church of Christ and the National Hispanic Media Coalition. “Sinclair earns massive revenues from these sidecar stations, which qualify as variable interest entities for which Sinclair is considered a ‘primary beneficiary.’”
The idea that a transaction must be approved if it doesn’t violate ownership rules is “misguided and incorrect,” said Free Press. “This argument ignores the burden that the Applicants bear to show affirmative public interest benefits from the license transfer,” Free Press said. “Simply claiming that the divestiture plan is ‘legal’ does not satisfy the public interest standard,” said Common Cause, NHMC and UCC.
The public interest would be hurt by hikes in retransmission-consent rates the deal would cause, said the American Cable Association. “Increased consumer prices is a garden-variety public interest harm, said ACA. “Applicants give the Commission no reason to depart from its prior conclusion that the creation of top-four duopolies will" boost retrans prices, said the American TV Alliance.
Many repeated that the FCC should wait for the court to rule on the UHF discount. “When the repeal of the policy is likely to be remanded, as is the case where all three judges have expressed doubts about the repeal’s wisdom, it is imprudent to allow a major merger whose legality depends on the repeal,” said Dish Network.