When Tribune Media Co. (NYSE: TRCO) ended its merger agreement with Sinclair Broadcast Group Inc. (NASDAQ: SBGI) Thursday morning, it did so with gusto, filing a lawsuit against Sinclair for breach of contract. Sinclair has finally responded.
The company said it has withdrawn its application with the U.S. Federal Communications Commission (FCC) and filed a notice of withdrawal of the application and a motion to terminate the hearing by an administrative law judge that the FCC had ordered last month.
Saying that Sinclair was “extremely disappointed” at failing in its $3.9 billion bid for Tribune Media, CEO Chris Ripley commented:
We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency. As Tribune, however commented, in their belief, the FCC’s recent designation of the deal for a hearing in front of an Administrative Law Judge would have resulted in a potentially long and burdensome process and, therefore, pursuing the transaction was not in the best interest of their company and shareholders. As for Tribune’s lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction. The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.
The FCC had ordered the hearing before an administrative law judge following its determination that Sinclair’s proposed divestitures in support of the merger would “allow Sinclair to control those stations in practice, even if not in name, in violation of the law.”
Tribune Media’s decision to terminate the deal simply speeded up the nearly inevitable result of the administrative hearing. When the FCC sends a merger to an administrative law judge, the deal is as good as dead.
Sinclair’s Ripley noted that the combined company “would have benefited the entire broadcast industry and the public,” a view not widely held by either the industry or the public.
Sinclair’s stock jumped on the announcement, and it traded up about 3.3% at $28.00 in the early afternoon. The stock’s 52-week range is $25.13 to $40.15, and the 12-month price target is $38.13.
Tribune Media shares traded up about 3.5% to $34.82, in a 52-week range of $31.61 to $43.71.