‘Sue Me,’ Sinclair Tells Justice Official as Tribune Deal Tanks
(Bloomberg) -- Sinclair Broadcast Group Inc. lost its $3.9 billion deal to buy Tribune Media Co. after goading the Trump administration’s top antitrust official with the tart phrase: "Sue me."
The exchange was detailed in a lawsuit filed Thursday by Tribune, which said Sinclair had failed to win regulatory clearance in part because it had insulted U.S. officials and rejected their offers to clear the transaction. Tribune filed the complaint after withdrawing from the deal.
The acquisition of Tribune and its 42 television stations would have made Sinclair, already the owner of more U.S. TV stations than any other company, so large it would need to sell some outlets to meet regulatory requirements. Instead of following a road map from regulators for how to address those issues, the Maryland broadcaster balked, Tribune said.
In January, the Justice Department’s top antitrust official, Makan Delrahim, told the companies the department would approve the merger if Sinclair agreed to sell stations in 10 markets where Sinclair and Tribune both competed, which was six more stations than Sinclair proposed.
The response from Sinclair General Counsel Barry Faber: “Sue me,” according to the complaint.
“Sinclair fought, threatened, insulted, and misled regulators in a misguided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell,” Tribune said.
Faber didn’t respond to messages left at his office or by email. The Justice Department declined to comment. Sinclair said in a statement that Tribune’s complaint is without merit and that it intends to fight the lawsuit. “We fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction,” Sinclair Chief Executive Officer Chris Ripley said.
The court filings give an unusual glimpse into tensions between a purchaser and its target over a deal that dragged on for more than a year. Sinclair, a politically conservative broadcaster that’s seen as friendly to President Donald Trump, suffered a blow in July when the Federal Communications Commission under Chairman Ajit Pai sent the deal to a hearing that Tribune said could delay the acquisition “for a very long time, probably years.”
Both the FCC and the Justice Department were reviewing the transaction. The Justice Department hadn’t issued a decision before both companies dropped their plans Thursday. Tribune in its complaint said Sinclair’s months of negotiations with antitrust officials delayed consideration at the FCC.
The duration was all the more perplexing given it was before Republican regulators who didn’t initially seem to be leaning toward rejection.
Pai had led the FCC to relax broadcast restrictions. As for the Justice Department, Sinclair wanted to assess Delrahim’s stance as the new antitrust chief after he took over in September, according to Tribune. Sinclair’s antitrust counsel, William Kolasky, preceded a meeting with Delrahim with a letter unfavorably comparing the Justice Department’s approach with that of the FCC.
“It was so refreshing to see the FCC, under Ajit Pai’s leadership, undertake a fundamental reform of its media ownership rules to relax regulations,” Kolasky said in the Dec. 31 letter, submitted by Tribune in the court filings. A heading on the letter said in bold-face type, “Resistance to Change/Moving backward.”
About two weeks after Sinclair challenged the Justice Department with its “sue me” statement, the companies met again with Delrahim and his deputy, who reiterated their view that Sinclair needed to sell 10 stations.
Faber accused Delrahim of “completely misunderstanding” the industry and of being “more regulatory than anyone before you, under any other president in 21 years,” according to an account of the discussion described by Tribune.
The FCC, too, has criticized Sinclair’s conduct. Sinclair “did not fully disclose facts such as the pre-existing business relationships” the company had with prospective buyers of stations in Chicago and Texas, the FCC said in its order sending the merger to hearing.
The Texas stations were to be purchased by a company formerly controlled by the estate of Sinclair executives’ mother. WGN-TV in Chicago was slated to go to a Maryland automobile executive who’s a business associate of Sinclair Executive Chairman David D. Smith.
“The record raises significant questions as to whether those proposed divestitures were in fact ‘sham’ transactions,” the FCC said in the order. Earlier, Pai said 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.”
Sinclair, in its statement Thursday, said “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.”
In a series of letters and emails filed in the Tribune lawsuit, Faber and Tribune Executive Vice President Edward Lazarus sparred over the divestitures, with Lazarus accusing Sinclair of ignoring at least four clear indications from Justice that meeting the department’s demand “would yield a pause in the investigation and a path to clearing the deal.”
Faber rejected that assessment, and refused to back down.
“Given that I have already explained our position on this matter, I do not intend to waste time responding to your most recent letter beyond letting you know that we disagree,” Faber said in a Dec. 21 email to Lazarus. “Happy holidays.”
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