Tribune pulls plug on $3.9B buyout by Sinclair

NEW YORK - Tribune Media is withdrawing from its $3.9 billion buyout by Sinclair and it's filing a lawsuit against it, citing breach of contract.

Tribune Media would be on the hook for a $135 million breakup fee, according to the agreement reached last year.

Sinclair Broadcast Group had offered to buy the Chicago company's 42 TV stations and had agreed to get rid of stations in some markets to gain regulatory approval. Tribune claims Sinclair used "unnecessarily aggressive and protracted negotiations" with the Department of Justice and Federal Communications Commission over regulatory requirements and refused to sell the stations it needed to.

FCC Chairman in July expressed "serious concerns" over the deal, saying Sinclair would still control the stations it divested in practice. That would violate antitrust laws.

"In light of the FCC's unanimous decision, referring the issue of Sinclair's conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable timeframe, if ever," said Tribune Media CEO Peter Kern, in a statement. "This uncertainty and delay would be detrimental to our company and our shareholders."

Some analysts think other companies could have interest in buying Tribune Media's stations.

"We think that it is likely that another suitor will emerge for Tribune in the near-term," Kenneth Duffel, an analyst with KDP Investment Advisors, said in a note. 

The two companies had until midnight Wednesday to call off their deal.

Sinclair is the nation's largest local broadcaster, reaching about 4 in 10 U.S. households through TV stations. It announced plans last year to merge with Chicago-based Tribune, a deal that would have given Sinclair access to 72 percent of American households. 

Sinclair also has become a significant outlet for conservative perspectives. The company was admonished by media watchdogs in April after dozens of Sinclair news anchors read an identical script expressing concern about "one-sided news stories plaguing the country." 

At the time, President Donald Trump tweeted his support of the company. Sinclair defended the script as a way to distinguish its news shows from unreliable stories on social media.

Tribune Media on Thursday also surpassed Wall Street forecasts in reporting second-quarter net income of $84.4 million, after reporting a loss in the same period a year earlier. The operator of the WGN America network posted revenue of $489.4 million in the period, also beating expectations.