Sinclair said to be aiming to buy Tribune Media for high $30s a share

Bloomberg

Sinclair Broadcast Group Inc. is aiming to acquire Tribune Media Co., owner of TV stations in big media markets including New York, Chicago and Miami, for a per-share price in the high $30s, according to people familiar with the matter.

Sinclair is working to finalize a deal on or before the same day Tribune reports first-quarter earnings, which is slated for the week of May 8, said the people, who asked not to be identified discussing private information. Shares of Chicago-based Tribune closed at $37.70 on Tuesday, giving it a market capitalization of about $3.3 billion.

Shares of Tribune jumped as much as 6.1 percent to $40.01 in New York, while Sinclair rose 5.1 percent.

Final terms of a transaction between Sinclair and Tribune haven't been agreed upon, and a deal could still fall apart, the people said. A Tribune spokesman declined to comment. Sinclair didn't respond to requests for comment.

With more friendly rules governing ownership concentration in broadcasting expected from the U.S. Federal Communications Commission, Tribune may have options beyond Sinclair. Other buyers are interested in Tribune, according to one person familiar with the matter. As earlier reported by Bloomberg, Nexstar Media Group Inc. has considered a bid for Tribune. Nexstar has a history of laying in wait for a potential deal, striking an agreement to acquire Media General Inc. in 2015 only after Media General had announced plans to merge with Meredith Corp.

Tribune, which owns 42 local-TV stations and the WGN America cable network, could even emerge as a buyer itself in what is expected to be a media merger spree in 2017.

But a theoretical marriage between Sinclair and Tribune, two of the largest local TV station owners in the U.S., hangs on a vote Thursday by the FCC to restore the so-called UHF discount -- which would make it possible for the combined entity to stay under a cap that limits coverage of the country by a single station owner to 39 percent.

Sinclair reaches 24 percent of the country with the UHF discount while Tribune covers 26 percent. When factoring in markets where both companies have stations and assuming the FCC reinstates the discount, that number rises to 42 percent, according to a Bloomberg Intelligence analysis. Sinclair and Tribune still overlap in markets accounting for 11 percent of the country, meaning any deal will also likely require divestitures.

Under the Obama administration, the agency last year eliminated the UHF discount, leaving some broadcasters unable to buy more stations or to sell to competitors who were also near or over the limit.

House Minority Leader Nancy Pelosi on Wednesday urged FCC Chairman Ajit Pai not to restore what she called a "loophole" that "defies logic," in part because there's no technical justification for treating stations differently.

A Sinclair-Tribune merger would be "bad news" as viewers lose an independent voice and pay-TV bills rise because Sinclair charges cable operators more, Pelosi said in a letter also signed by Representative Frank Pallone, the top Democrat on the Energy and Commerce Committee that oversees the FCC.

With an acquisition of Tribune, Sinclair would gain a stronger hand in negotiations with both pay-TV distributors and the major broadcast networks. Bigger scale will also help the combined company face down online competitors vying for a piece of the local advertising pie.

The impetus for Sinclair-Tribune deal came earlier this year when the FCC eased confidentiality requirements for companies selling airwaves in an auction. TV stations are voluntarily giving up airwaves in the sale for use by mobile providers, and are getting paid for doing so.

Sinclair, based in the Baltimore suburb of Hunt Valley, is pocketing more than $300 million from those sales, according to its annual report, and agreed to sell its alarm business for $200 million. The company also said in March that it would sell up to 13.8 million shares of Class A stock, worth almost $575 million at current prices.

With the deal, Sinclair would also get Tribune's minority stakes in the Food Network and its flagship cable network WGN.

Bloomberg's Paul Barbagallo and Todd Shields contributed to this report.

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