Sinclair makes changes to Tribune deal to appease regulators

Sinclair Broadcast Group Inc. has offered to abandon or revise sales of TV stations in Chicago and Texas to appease regulators who rebuked its divestiture plan that is part of a proposed purchase of Tribune Media Co.

Sinclair said in a statement Wednesday that it will stop 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.

Federal Communications Commission Chairman Ajit Pai on Monday called for sending the $3.9 billion deal to a hearing, putting the deal in jeopardy. The proposed FCC 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.

“I have serious concerns,” Pai said Monday, 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.”

The deal, if it goes through, would have an impact in Indianapolis. Chicago-based Tribune owns Indianapolis-based stations WTTV-Channel 4 and WXIN-TV Channel 59. WTTV is the city's CBS affiliate and WXIN is the local Fox affiliate. Some industry observers are predicting cuts at the local stations if Sinclair closes the acquisition.

Despite the unusually severe tone for the telecommunications regulator, suggesting Sinclair will have a difficult time getting the deal back on track, the company’s decision to amend its divestiture plan shows it has resolved to continue with the Tribune acquisition.

Sinclair proposed the station sales 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.

“Sinclair intends to request permission from the FCC to put the Dallas and Houston stations into a divestiture trust to be operated and sold by an independent trustee following the closing of the Tribune acquisition,” the company said in the statement. “Sinclair expects to have identified and entered into a purchase agreement with a third party buyer or buyers for the Dallas and Houston stations prior to closing. As a result of the withdrawal of the application relating to WGN, Sinclair will simply acquire that station as part of the Tribune acquisition, which is, and has always been, fully permissible under the national ownership cap.”

Sinclair denied in a statement Monday “in the strongest possible manner” any misrepresentations or lack of candor. “We have been completely transparent,” said Ronn Torossian, a spokesperson for the Maryland-based broadcaster.

Tribune shares rose 3.7 percent, to $34.55 each, on Wednesday, while Sinclair was little changed at $28.0.