NEW YORK – Tribune Media Co. and Sinclair Broadcast Group Inc. dropped after the U.S. Federal Communications Commission voted to send their proposed merger to a hearing, brushing aside an offer to revise divestiture plans to meet the agency’s objections.
Chairman Ajit Pai won unanimous support from his fellow commissioners late Wednesday for an order calling for a hearing before an administrative law judge, the FCC said in an email. The agency is to publish the order Thursday, which would reveal the substance of its objections that were earlier said to center around whether Sinclair misrepresented its plans before FCC officials.
Such a hearing could kill the deal because it freezes the companies in place with no resolution, possibly for months.
Both companies extended routs. Tribune fell 5 percent to $32.38 at 9:45 a.m. in New York trading after falling as low as $31.69. The stock has lost 22 percent of its value this week. Sinclair dropped another 4.2 percent, to $26.25, after earlier reaching a 52-week low of $26.15. It was the company’s fourth straight daily decline, with the stock down almost 19 percent for the week.
Stephens Inc. analyst Kyle Evans downgraded his recommendation on Tribune to equal-weight from overweight.
In an effort to avoid a hearing, Sinclair earlier Wednesday dropped its plans to sell WGN-TV in Chicago and to sell two Texas stations to a company formerly controlled by the estate of the mother of a top Sinclair executive. The stations in Dallas and Houston would go into a trust, for later sale, Sinclair said. As for WGN, “Sinclair will simply acquire that station,” according to a company statement.
Sinclair’s revised plan for Chicago and Texas was a response to criticism Monday from Pai, who said the company’s original station sales plan would violate the law and called for a hearing.
Ronn Torossian, a spokesman for Sinclair, declined to comment.
Death knells
Hearings have sounded a death knell for previous deals. For instance, in 2011, AT&T Inc. abandoned its proposed purchase of smaller T-Mobile US Inc. after the FCC proposed to send the merger to an agency judge for a hearing
Sinclair, which grew from a single TV station in Baltimore in 1971, is trying to leap into nationwide prominence with the deal for 42 Tribune stations in cities such as New York. The purchase proposed last year would lift Sinclair’s station total above 200.
Pai’s proposed order on Monday was said to mention possible misrepresentations or lack of candor regarding Sinclair’s proposed sale of WGN-TV to a car dealer who is a business associate of a top Sinclair executive. Sinclair has repeatedly denied any misrepresentations or lack of candor.
Sinclair proposed to sell stations because the merger would leave it bigger than allowed under FCC media ownership rules, which put a cap on what portion of the national TV audience one company can reach.
Todd Shields is a reporter for Bloomberg News.
