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Sinclair amends Tribune merger in hopes of winning regulatory approval

Sinclair isn't giving up yet as it tries to close the $3.9 billion deal to buy Tribune.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read
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The headquarters of the Sinclair Broadcast Group in Maryland. The company's $3.9 billion deal to acquire Tribune is in jeopardy as the FCC chairman expresses concerns.

Win McNamee / Getty Images

In an effort to appease regulators, Sinclair Broadcast Group is amending its deal to buy Tribune media.

On Wednesday, the company announced it will not divest three TV stations in Dallas, Chicago, and Houston, which it had previously said it would sell, in the hopes of winning approval for the $3.9 billion merger. In a statement, the company said it hoped this would "expedite" the transaction.

On Monday, FCC Chairman Ajit Pai threatened the deal when he said he had "serious concerns" with the merger. He also said he was asking for an administrative hearing, usually the first step in the FCC's process for nixing a merger.

Specifically, Pai said he's concerned with some of the divestitures Sinclair had agreed to in order to get the deal approved. In April, Sinclair offered to sell 23 TV stations. But some of those companies still have ties to Sinclair. Pai said in his statement he was troubled by this.

"The evidence we've received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law," Pai said in his statement.

Pai's statement came as a surprise given that many believed he had been paving the way for the merger by easing media ownership rules. The FCC's inspector general has reportedly been investigating his actions to make sure his policy positions have not been inappropriate.

Sinclair said it was taken off-guard by the FCC's statements on Monday. The company said it has been complying with FCC rules and that is has not misled the agency.

"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," the company said in a statement.

Sinclair also said it hoped modifying the deal would result in a quick approval of the merger, which was announced in May 2017.  

"We call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process," the statement continues.

The merger between Sinclair, already one of the largest local broadcasters in the country with nearly 200 stations, and Tribune has raised eyebrows as the combined company would have unprecedented control over local airwaves. Some critics are especially concerned given Sinclair's practice of forcing its stations to air must-run packages and editorials.

If the merger were to go through as proposed, Sinclair would have access to 72 percent of the TV viewing households in the US, exceeding a national ownership cap of 39 percent.

Again, Sinclair tried to alleviate some of these concerns with divestitures, but some of the companies it planned to sell stations to had ties to Sinclair. For instance, Sinclair planned to sell WGN in Chicago to a Maryland auto dealer, who is a business associate of Sinclair Executive Chairman David Smith, according to Reuters. Under the agreement, Sinclair was still going to run the station. As part of the amended deal, Sinclair is seeking permission to acquire WGN in Chicago instead of divesting it.

Sinclair also planned to sell stations in Dallas and Houston to Cunningham Broadcasting, a company controlled by the estate of Smith's mother. As part of the amended transaction, Sinclair now wants to put the Texas stations into a divestiture trust to be sold and operated by an independent trustee.

It's unclear if these changes will satisfy the regulators at the FCC. The Justice Department also has to sign off on the deal. And it's possible the FCC could have other concerns as well.

The FCC declined to comment.

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