Shares of Sinclair Broadcast Group and Tribune Media surged Wednesday amid speculation about a possible deal between the two television station owners.
Neither Hunt Valley-based Sinclair nor Tribune would comment, but Reuters reported that Sinclair had approached Tribune about possible combinations, citing anonymous sources.
Analysts said consolidation between the two companies makes sense, as Sinclair has been on a buying spree in recent years and has said it plans more acquisitions, while Tribune Media is for sale. Both are increasingly competing with Facebook and Google for viewers and advertisers.
"They're trying to take traditional media outlets and combine them, thinking scale will be beneficial," said Karyl Leggio, a finance professor at Loyola University Maryland.
Tribune's stock ended Wednesday up 8.25 percent, while Sinclair's closed up 4.76 percent. Tribune is the former parent company of The Baltimore Sun and still owns the newspaper's headquarters building at 501 N. Calvert St.
The speculation came as Sinclair announced separately Wednesday that it had acquired the assets of Tennis Media Co., which owns Tennis magazine and Tennis.com. Sinclair paid $8 million and could pay up to $6 million more for the properties, based on certain contingencies.
The acquisition solidifies Sinclair's position as a top provider of tennis programming and news across multiple mediums given its ownership of the Tennis Channel.
"The acquisition of Tennis Media Company brings together tennis' television, print and online platforms, with significant advantages in the tennis rights and stakeholder world," said Chris Ripley, Sinclair's president and CEO, in a statement.
Sinclair and Tribune could be discussing a number of possibilities, ranging from a full merger to Sinclair acquiring Tribune's CW-affiliated stations, the WGN America cable network or its stake in the Food Network, Reuters reported.
In a brief Wednesday morning, Marci Ryvicker, a senior analyst with Wells Fargo Securities, said that Sinclair and Tribune would have big synergies and described a potential deal as "a good sign for the entire industry."
Of the possible deals between Sinclair and Tribune, Ryvicker said in her brief that she thinks WGN America, which she valued at $400 million, is the most likely target. Tribune is unlikely to want to part with Food Network's strong dividends and its CW stations have lower retransmission rates, she wrote.
A full combination of Sinclair and Tribune Media could face regulatory hurdles. Under current FCC regulations, no one company can reach more than 39 percent of households. Sinclair is near the cap and Tribune is just over it.
But the potential deal comes amid a wave of consolidation in media and broadcasting, and as many in the industry anticipate looser regulations under the administration of President Donald J. Trump and his new FCC chairman, Ajit Pai.
Raising or even eliminating the limit on how many households any one broadcaster can reach could be among the regulatory changes coming under Pai's leadership and would make a full combination between Sinclair and Tribune more feasible, said Daniel Kurnos, an analyst at Benchmark Co., a financial advisory firm.
Despite the possibility of a friendlier regulatory environment, a deal is not a sure thing, he said.
"The price would have to be right, the assets would have to be right and there are going to be a lot of other opportunities for Sinclair to scale up without Tribune," Kurnos said. "So Sinclair is going to feel no pressure to make this acquisition."
Consumer advocates warned that consolidation between Sinclair and Tribune could lead to cuts in local news.
"Local broadcasting gets less and less local when you have a bulk of stations owned by a few companies," said Matt Wood, the policy director at Free Press, an advocacy group that opposes media consolidation.
Sinclair owns 173 stations in 82 mostly smaller markets. Tribune has 42 owned or operated stations, but would give Sinclair more presence in large markets, such as Chicago, Philadelphia and New York City, that are not currently part of its network, Wood said.
Sinclair officials have expressed optimism that the regulatory environment will improve and believe that more consolidation is in store for the industry.
Following Sinclair's fourth-quarter earnings, David Smith, Sinclair's executive chairman, predicted 2017 would be "a pivotal year for Sinclair and the broadcast industry," with the potential for deregulation on the horizon.
In a conference call with investors the same day, Sinclair CEO Ripley said the company was "optimistic" about Pai's leadership. The deregulation expected under Pai should bring a wave of consolidation, he said, "which I predict will allow broadcasters to compete more effectively with the big diversified media companies."
Tribune, meanwhile, has continued to sell off assets.
In September, the company sold its Chicago headquarters, Tribune Tower, to Los Angeles-based developer CIM Group for $240 million. The Baltimore Sun headquarters is under contract.
Late last year, Tribune agreed to sell Gracenote, its digital entertainment and data business, to Nielsen for $560 million.
Tribune CEO Peter Liguori, who has spearheaded many of the company's deals since it emerged from bankruptcy in 2013, announced in January he would step down this month.
The Chicago Tribune contributed to this article.