Proposed Sinclair Spin-Offs Face More Scrutiny

Sinclair Broadcast Group Inc.’s bid to become a broadcasting powerhouse by purchasing Tribune Media Co. hinges on spinning off TV stations to comply with U.S. limits on broadcast ownership.

Yet its proposals to sell stations from Pennsylvania to California are drawing fresh scrutiny as critics, including business rivals, say some of the transactions are designed to evade the ownership rules, reports The LA Times.

In one case, two Texas stations are to be sold to a partner company that until recently was controlled by the estate of the mother of Sinclair’s controlling shareholders. And the flagship Tribune station in Chicago, WGN-TV, is going to an automobile executive who’s a business partner of Sinclair Chairman David D. Smith.

“They’re not really arm’s-length. They’re not really divestitures,” Chris Ruddy, chief executive of Newsmax Media Inc., which offers TV news that competes for viewers with Sinclair, said in an interview. “It’s just really an insult to the public, to the rules, and to fairness.”

Sinclair says the station buyers are independent businesses, and that it’s working diligently to follow the rules as it seeks to close the $3.9-billion Tribune deal proposed in May 2017. “Ownership rules are not being evaded; they are being complied with,” Sinclair said in a statement.

The Justice Department and the Federal Communications Commission are scrutinizing the transaction, with a decision possible in coming weeks. At issue is whether Sinclair, which grew from a single TV station in Baltimore in 1971, can win approval for the purchase of Tribune’s 42 stations, including outlets in New York and Los Angeles. The purchase would lift Sinclair’s station total to more than 200.

Once all its proposed purchases and sales are completed, Sinclair calculates it would reach almost 59% of the U.S. audience — or less than 38% using a discount allowed under FCC rules. That snugs it up against the U.S. national cap of 39%.

The discount, which lets station owners count only half the audience of some stations, is under challenge in a court case, and a ruling expected by August could leave Sinclair above the cap. FCC Chairman Ajit Pai also may act independently to raise the ownership limits, even as Sinclair’s deal remains under consideration.