Sinclair/Tribune HDO Won't Scare Off Broadcast Dealmaking
The expected unraveling of Sinclair buying Tribune isn’t likely to deter future deals, said broadcast executives, brokers, analysts and attorneys in interviews (see 1807190060). Sinclair’s deal included circumstances that are unlikely to apply to other transactions, even those with sidecar companies, industry officials said. But continued uncertainty about the ownership cap and a lack of buyers still means dealmaking will be slow, said analysts. With the future of the UHF discount and the cap unclear, companies “can’t be sure what they’re buying,” 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.
Sinclair/Tribune’s scale, shifting deal particulars, lengthy approval period and entanglement with its divestiture purchasers are all unlikely to apply to other broadcast transactions, said many. Sinclair received “pushback” that other deals aren’t likely to face, said S&P Global Senior Research Analyst Justin Nielson. The details of the hearing designation order were so “unique” that other broadcasters shouldn’t feel that similar accusations could be leveled against them, said BIA/Kelsey Chief Economist Mark Fratrik.
The HDO’s focus on sidecars isn’t likely to lead future deals to avoid joint sales agreements and shared service agreements, attorneys and analysts said. Weeks before the HDO, Gray and Raycom submitted such a merger with a plan to divest all market overlaps (see 1806250057), but industry officials said that sort of submission is unlikely to be a trend. Broadcasters are looking to Gray’s proposed top-four duopoly in Sioux Falls, South Dakota (see 1806080055), industry officials said. If that's approved, future top-four showings are more likely, they said. Sinclair/Tribune was also at one point seen as a test case for the new top-four rules (see 1803070050).
“The FCC has recognized that JSAs are beneficial,” said Gray Television Deputy General Counsel Rob Folliard. Agency Chairman Ajit Pai repeatedly has touted the advantages of such arrangements to smaller stations. Broadcasters will still propose such arrangements but will be extra careful how they are presented, said Garvey Schubert broadcast attorney Larry Miller. Concern about extra FCC scrutiny of sidecars may affect how they are structured but is unlikely to end them, said Fletcher Heald broadcast attorney Frank Jazzo. Sweetheart purchase prices, options to buy and other signs of a lack of separation between the buyer and seller are likely to be avoided, attorneys said.
The foggy future of the national ownership cap and the UHF discount are likely a bigger obstacle to dealmaking than the FCC actions on Sinclair/Tribune, Ryvicker said. The industry is awaiting a decision from the U.S. Court of Appeals for the D.C. Circuit on the discount and anticipating FCC action to raise the cap, but it’s not clear how either event will play out or when, she said: Without certainty on those matters, prospective buyers can’t be sure how big they can grow or what they might need to divest. Even if the court rules soon and the FCC acts quickly to raise the cap, broadcast dealmaking would likely remain on hold until the inevitable court challenge of whatever action the FCC take is resolved, Ryvicker said. There won’t be “a big wave” of mergers or acquisitions until then, she said. “Companies need clarity.”
That uncertainty also could affect Tribune’s future if its deal dissolves, industry officials said. Though Fox is seen as still interested in the Tribune stations it would have acquired as divestitures through Sinclair/Tribune, there’s no obvious buyer for the whole company, Nielson said. Buying Tribune made sense for Sinclair because of synergies with Sinclair’s existing business, but no broadcaster big enough to buy Tribune would do so with the cap and discount up in the air, Ryvicker said. Outside investors are also unlikely, Nielson said.