Sinclair/Tribune Expected to Break Up Thursday; Sinclair Mum
Sinclair’s proposed deal with Tribune is expected to break up Thursday, but Sinclair executives didn’t comment on the transaction during an earnings call Wednesday, though Sinclair CEO Chris Ripley said an update would be coming “soon.” Under Tribune’s agreement with Sinclair, passing Wednesday’s deadline allows Tribune to walk away from the deal without suffering a breakup fee, attorneys and analysts told us. Wednesday was also the deadline for parties to file notices of appearance in the administrative law judge proceeding, and those filings could provide a clue to whether Sinclair intends to battle the allegations against it, attorneys said. Tribune announced Wednesday it was set to hold an 8 a.m. conference call Thursday, before the opening of the stock market.
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Tribune was expected to announce Thursday it has pulled out of the deal with Sinclair, analysts and attorneys said. “I really do think the deal is going to get scuttled,” said S&P Global Senior Research Analyst Justin Nielson, saying the FCC’s ALJ proceeding and a DOJ investigation into advertising practices make it unlikely Sinclair/Tribune would proceed. “We are working with them to analyze approaches to the regulatory process that are in the best interest of our companies, employees and shareholders,” said Ripley in a released statement. Tribune didn’t comment. "We cannot predict the timeframe for completion or the outcome of the ALJ hearing," said Sinclair in an SEC filing Wednesday. "There can be no assurance that the transaction with Tribune will be consummated. The failure to complete the transaction may adversely affect Sinclair’s business and operations."
If Sinclair and Tribune’s deal breaks up, industry attorneys have differing opinions on what would happen with the matters of candor raised in the FCC’s hearing designation order. Though the withdrawal of the deal would likely mean the hearing doesn’t proceed, the FCC could still act on the allegations of deception against Sinclair, attorneys said. The character issues raised in the HDO could haunt Sinclair’s renewals and future applications, attorneys said.
Sinclair’s “appetite” for future transactions “hasn’t changed,” Ripley said. The future of the Tribune deal doesn’t alter Sinclair’s philosophy toward M&A, he said. The regulatory environment on dealmaking is “favorable,” Ripley said, citing the UHF discount’s recent win in court. With other broadcasters seeking deals, he said he expects more dealmaking in the near future.
The HDO required parties seeking to participate in the case to file notices of appearances by midnight Wednesday. The parties to the deal and entities that filed petitions to deny were directed to file such notices, and the filings that come in could indicate how Sinclair plans to proceed and what sort of opposition the company could face in the ALJ proceeding, said broadcast attorney Howard Weiss, an opponent of the deal. The deal “will be dismissed with prejudice for failure to prosecute,” without notices of appearance filed by Sinclair and Tribune Wednesday, the HDO said. Parties that filed petitions to deny have to file notices of appearance to be heard in the case, the HDO said.
Sinclair’s ATSC 3.0 plans are still progressing, Ripley said. Trials of the new standard in Phoenix and Dallas are proceeding, with Dallas expected to deploy a 3.0 signal with a single frequency network in “about 60 days,” he said. Broadcast groups are working out plans for how channels will be shared during the transition to the new standard, he said. “There’s a lot of work going on in the background,” he said. ATSC 3.0 deployment will happen as the post incentive auction repacking progresses, he said.
“Second quarter results came in well ahead of guidance in all key financial metrics, and we expect the second half of the year to continue to be robust, underlined by increasing distribution revenues and strong political advertising spend,” said Ripley.