Sinclair Rout Deepens After Offer to Revise Sales of TV Stations

(Bloomberg) -- Sinclair Broadcast Group Inc.’s rout deepened after it offered to appease regulators by revising a plan to sell TV stations as part of its purchase of Tribune Media Co.

Sinclair’s announcement on Wednesday shows the company intends to pursue the $3.9 billion acquisition that some analysts had all but given up for dead after criticism from Federal Communications Commission Chairman Ajit Pai. Sinclair fell as much as 3 percent Wednesday, extending losses that are dragging the stock toward its worst monthly performance in almost a year.

Sinclair said in a statement Wednesday it is dropping its plan to sell WGN-TV in Chicago, and won’t sell two Texas stations to Cunningham Broadcasting Corp., which was 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 the statement.

Pai on Monday called for sending the deal to a hearing, something that could take months, and the proposal has gained enough support within the agency to succeed in voting that hasn’t concluded.

The FCC can decide to consider the modified plans for the three stations, and if it does, Pai “can definitely make the hearing designation order go away,” said Andrew Jay Schwartzman, a Washington broadcast attorney.

Tina Pelkey, an FCC spokeswoman, declined to comment.

Tribune rose 1.4 percent to $33.78 at 11:32 a.m. in New York trading after rising as high as $34.70, while Sinclair was down 1.6 percent to $27.60. Sinclair shares are down 16 percent this week and Tribune is 12.3 percent lower on the week.

Pai’s proposed order is 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 said it believes the FCC is questioning proposed divestitures in Dallas, Houston and Chicago.

“I have serious concerns,” Pai said, adding that some of Sinclair’s proposed station divestitures “would allow Sinclair to control those stations in practice, even if not in name, in violation of the law.”

Sinclair on Wednesday again 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.

“We call upon the FCC to approve the modified Tribune acquisition in order to bring closure to this extraordinarily drawn-out process,” Ronn Torossian, a spokesman for Sinclair, said in the statement. “We have been completely transparent.”

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