Sinclair Broadcast Group insists it will press on and is already eyeing other acquisition targets in its bid to expand into a full-fledged conservative media titan on par with Fox News. | William Thomas Cain/Getty Images Sinclair's merger breakup could frustrate its TV ambitions Although many suspected Tribune Media would pull the plug on the merger, few expected it to sue while accusing Sinclair of deception.

Sinclair Broadcast Group’s singularly nasty breakup with Tribune Media on Thursday may put a serious damper on the conservative-leaning broadcast giant's ability to expand, despite its persisting hunger to do so.

Tribune was widely expected to pull the plug on the $3.9 billion merger this week after the FCC in July sent the deal into regulatory purgatory. But few foresaw the company doing so in the fierce terms it did on Thursday, when it not only pulled out but also sued Sinclair for least $1 billion in damages, filling a court filing and 176 pages of exhibits with evidence meant to back up allegations of Sinclair deception and potentially self-dealing behavior on the part of executive chairman David Smith.


Sinclair promised in its contract "to use their best efforts to get their deal closed as soon as practical," Tribune general counsel Eddie Lazarus said on a Thursday morning earnings call. "They violated those obligations in spectacular fashion. ... We feel very confident in that case.”

Sinclair insists it will press on with business as usual and is already eyeing other acquisition targets in its bid to expand into a full-fledged conservative media titan on par with Fox News. But with few Washington allies outside of President Donald Trump, and now having botched the Tribune deal, the company may struggle to find other partners willing to roll the dice on facing regulators side-by-side with Sinclair.

“Tribune flat-out says from the beginning Sinclair was a bad partner,” said Yosef Getachew, director of the Media and Democracy Program at public interest group Common Cause, which opposed the merger. “Any company that is interested in an agreement is going to think twice.”

The collapse of the Tribune deal follows 15 months of wrangling between Sinclair and the federal government, closing the book on a deal that was supposed turn Sinclair — already America’s biggest TV station owner, with nearly 200 stations to its name — into an unprecedented broadcast news giant reaching as many as 72 percent of U.S. households.

Sinclair now faces the prospect of having to rebut an embarrassingly detailed set of allegations and potentially grappling with bigger ethics investigations that may dog its executives. Critics say Sinclair's practice of selling stations to close associates, which is precisely what doomed the Tribune deal, raises serious character questions that could imperil the company's ability to hold broadcast licenses. That’s on top of an ongoing Justice Department investigation that Sinclair confirms was launched following inquiries into its merger proposal.

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Through it all, Sinclair has almost entirely lacked any show of congressional GOP support for the merger despite Trump cheering on the deal and Sinclair executives scheduling meetings with top lawmakers including Senate Commerce Chairman John Thune (R-S.D.). The only lawmaker to publicly step up to defend the deal had been Rep. Andy Harris (R-Md.), who touted on Monday the Maryland-headquartered broadcaster’s contributions to the state’s jobs. His office had privately sought to rally fellow lawmakers to join Harris on a draft letter pushing the FCC to not kill the deal, but the letter was ultimately never sent.

The chilly Washington reception represents a stark turnabout from what critics saw as favor from the Trump administration. The FCC wasted no time last year in advancing several measures aimed at deregulating the marketplace for broadcasters, including one to restore a media ownership loophole that directly enabled the Sinclair-Tribune merger proposal.

On Wednesday, Sinclair CEO Chris Ripley insisted during an earnings call that the broadcaster still views the regulatory climate as favorable. He said Sinclair has a strong “appetite” to expand regardless of the Tribune deal outcome, speaking of potential deals involving regional sports networks and other targets. A day earlier, Sinclair announced the launch of an advertising platform designed for streaming TV services, another potential avenue Sinclair could expand into.

But in a filing with the SEC that same day as Ripley's call, Sinclair acknowledged that the “failure to complete the transaction may adversely affect Sinclair’s business and operations.”

And now Tribune’s dramatic withdrawal, loaded with detailed allegations of Sinclair officials botching the merger process with federal regulators, could inhibit other companies from seeking deals with Sinclair. The lawsuit complains of aggressive overreaches from Sinclair officials negotiating with the Justice Department and FCC, crystallizing in an incident in which Sinclair’s top lawyer dared DOJ antitrust chief Makan Delrahim, “Sue me.”

Tribune said it was also troubled by Sinclair's plans to ensure the combination would meet federal ownership limits by arranging to sell off TV stations to Sinclair allies personally close to Smith. Tribune revealed that it quietly threatened in February to withdraw from the merger and sue over its concerns.

“Sinclair knew that it was taking a substantial risk by concealing from the FCC material information about its relationships with certain buyers,” Tribune said in its lawsuit.

Ripley disputed such claims without addressing specifics.

“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,” he said in a statement Thursday. “As for Tribune’s lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction.”

The lawsuit is “entirely without merit” and Sinclair will “vigorously” defend itself, Ripley added.

The lawsuit’s terms are bound to create trouble for a more vulnerable Sinclair, critics from public interest groups told POLITICO.

John Bergmayer, senior counsel at deal opponent Public Knowledge, speculated that Tribune may be intentionally emphasizing how much Sinclair arrangements seek to favor Smith. Sinclair shareholders may launch their own litigation what they see as unlawful self-dealing.

“It’s not a mistake,” Bergmayer told POLITICO of the lawsuit's strong emphasis on concerns like the side deals. “This stuff seems like it really benefits David Smith.”

The FCC could also pursue investigations beyond the merger. In referring the merger to an administrative law judge in July, FCC Chairman Ajit Pai said the terms of the side deals may have reflected a lack of candor on Sinclair's part. Following Tribune's pullout, Sinclair on Thursday moved to withdraw the merger from consideration before that judge, but some say the underlying concerns could persist. Craig Aaron, CEO of advocacy group Free Press, issued a statement questioning whether Sinclair is entitled to hold any licenses to the public airwaves following its alleged behavior.

Pai spokespeople declined to comment Thursday on Tribune’s lawsuit.

Chris Ruddy, CEO of Sinclair competitor Newsmax and a longtime critic of the deal, said he and other critics were vindicated by Thursday's developments. "Sinclair had failed to respect the regulatory review process and the rule of law, as it relates to market concentration and media ownership," Ruddy said.