Sinclair Doesn't Foresee Major Station Sales in $6.6 Billion Tribune Buy; Regulatory OK Seen

Observers told us they expect the takeover to get regulatory OK, while public interest groups panned it. Sinclair said it expects the deal to close in Q4.

If regulators do require sales of some stations, the most likely markets would be Salt Lake City, St. Louis and Wilkes-Barre, Pennsylvania, Ripley said. According to Sinclair's website, it owns Salt Lake City's KJZZ-TV and KUTV; KENV-DT, Elko, Nevada; KMYU St. George, Utah; KDNL-TV St. Louis; and WOLF-TV Hazleton, WSWB Scranton and WQMY Williamsport, all in Pennsylvania. Tribune, according to its website, owns KPLR-TV St. Louis, KSTU Salt Lake City and WNEP Scranton. The combined company would face local ownership rules in nine markets, Wells Fargo analyst Marci Ryvicker said in a note to investors.

Experts said the Tribune deal would give Sinclair a nationwide platform with ATSC 3.0 coming, making implementation an even higher priority. Ripley said Sinclair, in its spectrum consortium with Nexstar Media (see 1703150067), will reach more than 86 percent of the nation with low-band spectrum aggregation, with the intention of being able to add other broadcasters to reach 100 percent. That coverage goal "was a big strategic driver" for the Tribune transaction, he said, because it opens the door to options ranging from a ubiquitous wireless virtual MVPD to connected car services. Ripley said the Tribune deal won't speed up Sinclair's spending on ATSC 3.0 preparation: "We are already moving very quickly."

Cowen analyst Paul Gallant thinks the acquisition will get FCC OK, he emailed us. "The new FCC views the ownership rules as outdated, and this deal is a chance to signal that view. But broadcast M&A operates in kind of parallel universe without a real antitrust framework. So I don’t think Sinclair-Tribune is a referendum on how the new Administration will handle cable or wireless deals.”

Without a lot of head-to-head competition, the deal makes sense for Sinclair and also should see relatively smooth sailing before regulators, said broadcast lawyer Frank Jazzo of Fletcher Heald. Tribune has two sidecar stations in two markets, and it's unclear what might happen to them in the deal, said a broadcast attorney. They were spun off originally into sidecars because Tribune also had a newspaper in those markets, though that's no longer the case, the attorney said. The attorney also said the deal, while seemingly allowable by the FCC since the reinstatement of the UHF discount, could still face some petitions to deny from public interest groups, just on the grounds it's too big. Others had seen the UHF discount reinstatement as possibly leading to a Tribune sale (see 1705010048).

More M&A?

Expect more consolidation, with this perhaps one of the bigger deals that follow the recent end of the incentive auction quiet period, broadcast allies agreed in interviews Monday.

In addition to spreading out costs among more stations, such M&A also can help fund deployment of ATSC 3.0 and other new technology, said CEO Robert Prather of Heartland Media, owner of 11 TV stations. “The UHF discount returning to status quo helps a number of parties, they have room to acquire stations,” said TV station lawyer David O’Neil of Rini O’Neil, which isn’t involved in Sinclair/Tribune. “This is obviously the largest one, but I think there will be many deals like this over the course of this year.”

Such M&A among owners of TV stations helps them better compete with MVPDs, do better on retransmission consent and also contend with the broadcast networks, said Prather. ATSC 3.0 meanwhile “is great and I think the sooner we can get it going, the better," he said. “We need that to compete with these cable guys especially and with all the [over-the-top] stuff coming. I think we’ve gotta be much more innovative and much more flexible.” M&A may help with the 3.0 rollout, as “it’s expensive when you change formats,” said the broadcaster CEO.

The proposed deal is "a scandal," Free Press said in a statement. “The Trump FCC has been gaming the rules so that Sinclair’s holdings look smaller, but even then the company still exceeds the national ownership caps. These rules were designed to ensure a diversity of local voices, and Sinclair has been using every trick in the book to evade and undermine them for years. But under [President Donald] Trump, it no longer has to pretend. Sure looks like a quid pro quo: friendly coverage and full employment for ex-Trump mouthpieces in exchange for a green light to get as big as Sinclair wants."

Sinclair/Tribune "is yet another example of media consolidation that can harm consumers" through reduced viewpoint diversity and homogenized broadcast content, and higher cable bills due to multiple markets being tied together in retransmission consent talks, Public Knowledge in a statement. “Despite Sinclair’s ties to the Trump administration, we hope that the Department of Justice and FCC will closely examine this deal and reject it and any other merger that leads to higher prices for consumers or harms the public interest.” Common Cause called Sinclair/Tribune "expected and disappointing," with the GOP-controlled FCC "foaming at the mouth to rubber stamp more massive media mergers" while Sinclair carries a reputation for less-than-stellar journalism.

Sinclair said the combined company would cover 108 markets, including 39 of the top 50 designated market areas, plus a variety of networks including WGN America, Tennis Channel and Comet TV. "We will be the largest broadcast group by a country mile," Ripley said. Benefits of the deal include increased retransmission consent revenue, with immediate contractual step-ups to Sinclair rates, more heft in buying syndicated programming, and more-efficient station-level operations, Ripley said.

WGN America network will shift from high-cost ordinal programming to reruns and "more cost-effective originals" under Sinclair, Ripley said. He said the station's ratings currently don't justify Tribune's levels of spending on original programming.