Tribune Media Co said on Thursday it had terminated a $3.9 billion deal to be acquired by Sinclair Broadcast Group and was suing Sinclair for breach of contract, after regulators objected to the acquisition that was supported by U.S. President Donald Trump.
Tribune filed the lawsuit against Sinclair, the largest U.S. broadcast station owner, alleging material breach of contract over its failure to win over regulators 15 months after the merger was first announced.
Tribune seeks about $1 billion of lost premium to Tribune's stockholders and additional damages in an amount to be proven at trial, according to a copy of the lawsuit filed in Delaware.
The deal's termination, which holds back Sinclair's efforts to dramatically expand, comes after criticism by Democrats and public advocacy groups over whether the merger was in the public interest. It also follows a significant blow from the Republican-led Federal Communications Commission last month, when it questioned Sinclair's candor over the planned sale of some stations.
The FCC said Sinclair did not "fully disclose facts" about the planned sale of three stations, including pre-existing business relationships between the company and prospective buyers. It also said the $60 million purchase price for Tribune's WGN-TV in Chicago "appeared to be significantly below market value."
Sinclair shares sank nearly 4 percent to $26.02 in early trading, while Tribune climbed 2.7 percent to $34.55.
"To maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the Department of Justice and the FCC over regulatory requirements," Tribune said. "Sinclair's entire course of conduct has been in blatant violation of the merger agreement and, but for Sinclair's actions, the transaction could have closed long ago."
Sinclair said in a statement that "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," adding that "as for Tribune's lawsuit, we fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction."
FCC Chairman Ajit Pai has been vocal in his opposition to the deal, a stance that was criticized by Trump. "So sad and unfair that the FCC wouldn't approve the Sinclair Broadcast merger with Tribune. This would have been a great and much needed Conservative voice for and of the People," Trump said in a Twitter post in July.
Advocacy group Free Press said in an FCC filing in August 2017 that Sinclair forces its TV stations to "air pro-Trump propaganda and then seeks favors from the Trump administration." The group praised Tribune's announcement Thursday.
Pai told Congress after Trump's tweet that he stood by his decision to refer the issue to a hearing. The FCC declined to comment on Thursday. Sinclair, which owns 192 stations, said in May 2017 that it planned to acquire Chicago-based Tribune's 42 TV stations in 33 markets.