The Federal Communications Commission said on Thursday it did not believe a proposed mega-merger between Sinclair Broadcasting Group and Tribune Media would serve the public interest, saying it took issue with a number of proposed divestiture plans offered by Sinclair to appease federal regulators who were scrutinizing the deal.
At issue was Sinclair’s offer to divest a number of stations to other companies in order to satisfy ownership caps and other rules imposed by the FCC and federal law. One of the most-heavily scrutinized deals involved Sinclair’s offer to sell Tribune’s flagship station, WGN-TV (Channel 9) in Chicago, to a Maryland car dealership owner who had close ties to a Sinclair executive and no previous experience in the media industry.
A number of critics argued in formal briefs filed by the FCC that the divestiture plan was a ruse to allow Sinclair to say on paper that it had sold the station while continuing to operate and profit off the broadcast outlet through an informal arrangement known as a joint marketing agreement. Sinclair already has similar agreements with a handful of stations across the country, mainly in smaller broadcast markets.
The FCC agreed, saying on Thursday it was concerned that “Sinclair would have owned most of WGN-TV’s assets, and…would have had an option to buy back the station in the future.”
Mainly on this issue, the FCC said it was “unable to find…the grant of the applications would be consistent with the public interest.” It referred the matter to an administrative law judge for review.
Such business transactions rarely survive such a review, and it was not immediately clear if Sinclair or Tribune intended to continue with their proposed merger.
In a press release issued Thursday afternoon, a Tribune spokesperson said the FCC’s decision to refer the matter to an administrative law judge was “troubling,” adding that the company would be “greatly disappointed” if the proposed merger with Sinclair did not continue forward.
“Thanks to the great work of our employees, we are having a strong year despite the significant distraction caused by our work on the transaction,” the statement said. “Thus, are well-positioned to continue maximizing value for our shareholders going forward.”