Sinclair-Tribune Deal Faces New Federal Resistance

Sinclair Broadcast Group Inc. is encountering resistance from the Federal Communications Commission as it seeks approval for its $3.9 billion acquisition of Tribune Media Co, reports The Wall Street Journal.

At issue is Sinclair’s proposed plan to spin off Tribune-owned television stations in New York and Chicago so that it will be in compliance with the FCC’s ownership regulations, people familiar with the matter said. The FCC, which has a broad mandate to review whether the combination of the broadcasters would be in the public interest, is pushing back on the potential new owners of the spun-off stations, the people said.

Under the plan submitted to the FCC last month, Sinclair said it would sell WPIX-TV New York to Cunningham Broadcasting Corp. for $15 million and WGN-TV Chicago to Steven Fader for $60 million.

Both purchasers have long ties to Sinclair and its executive chairman, David Smith.

Cunningham Broadcasting is controlled by the estate of Carolyn Smith Cunningham, Mr. Smith’s mother, and the majority of Cunningham Broadcasting’s local TV stations are managed by Sinclair. Mr. Fader is a partner with Mr. Smith in Atlantic Automotive Corp., which owns car dealerships. At Atlantic Automotive, Mr. Fader serves as chief executive and Mr. Smith sits on the board.

Under the terms of the agreement Sinclair put forth to the FCC, Sinclair would operate the spun-off stations as if they were its own. However, Sinclair wouldn’t be the licensee, meaning it would be in compliance with the FCC’s ownership rules that limit how much of the country one broadcaster can reach. Besides handling advertising sales, Sinclair would also be involved in local news coverage.

Such agreements, known as “sidecar” arrangements, are allowed by the FCC. However, in the case of the New York and Chicago stations, the regulatory agency wants more distance between Sinclair and the would-be owners of the properties, the people said.