Sinclair May Face M&A Hurdles With Character Questions Remaining
Sinclair will have a hard time buying TV stations until outstanding character questions affirmed in an FCC administrative law judge ruling Tuesday (see 1903050022) are resolved, said broadcast attorneys and media brokers in interviews. ALJ Jane Halprin dismissed the agency's Sinclair/Tribune hearing designation order but said the allegations against Sinclair “reasonably warrant a thorough examination,” and should be considered when Sinclair is seeking commission approval for a license transfer or renewal.
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That’s “an impediment” that will severely limit Sinclair’s attractiveness as a buyer, said broadcast broker Gregory Guy. Any deal that has to include an FCC resolution of candor questions “is unlikely to move quickly,” said Holland & Knight broadcast lawyer Charles Naftalin.
Sinclair's pleased the ALJ "dismissed with prejudice the Hearing Designation Order,” it said. “We were completely candid, transparent and honest with the FCC during its review of our proposed acquisition of Tribune Media.” Tribune didn’t comment. Its $1 billion lawsuit against Sinclair over the dissolution of the deal has been proceeding in the Delaware Court of Chancery (see 1808290058).
Any action Sinclair takes with its licenses that requires FCC approval would likely trigger an agency action to resolve the character matter, and that’s most likely to take the form of a hearing, said Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman. It’s possible Sinclair could get around that process by reaching a consent decree with the commission, but that’s considered unlikely with the current FCC, lawyers said. If a settlement were on the table, an HDO based on such serious allegations would likely not have been circulated, broadcast attorneys said. If Sinclair doesn’t bring a transaction to the commission, the character questions will come up on their own when its stations come up for license renewal in 2020, lawyers noted.
The ALJ ruling doesn’t expressly compel such a hearing, a broadcast attorney noted. Halprin said that during a future proceeding, it “may” be determined that examination of the allegations is “warranted.” Language in Tuesday’s order focusing on the seriousness of the charges and raising the possibility of future proceedings would make it very difficult for Sinclair to buy a station or renew a license without triggering an FCC action to resolve the character questions, attorneys said. The end of the current hearing proceeding “doesn’t just wash everything away," said broadcast attorney Howard Weiss, who opposed Sinclair/Tribune.
Though experts have speculated for months license transfers could trigger FCC action on the candor questions, Sinclair CEO Chris Ripley said (see 1902270050) on last week's Q4 call that the broadcaster made overtures in two recent TV deals. Industry officials said those deals were sales of stations from Cordillera Communications -- which went to Scripps (see 1902050048) -- and many Cox stations, which went to investment fund Apollo (see 1902150051). Ripley said the deals didn’t work out because prices went higher than Sinclair wanted to pay. Sellers that have other options aren't likely to take on the uncertainty that would be involved in resolving Sinclair’s FCC issues, Guy said.