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Deal Critics to Tribune Board: Abandon Merger or Quit

A quartet of high-profile Sinclair-Tribune deal critics have gotten together to urge Tribune to pull the plug on the deal, a deal the FCC says it has major issues with and has designated for hearing on issues of Sinclair candor and possible misrepresentation.

Related: FCC Sinclair-Tribune Hearing Order Raises Issue Sham Ownership

That came in a letter to Tribune board members from Public Knowledge President Gene Kimmelman, Brian Hess, executive director of the Sports Fans Coalition, Gigi Sohn, distinguished fellow at the Institute for Technology Law and Policy; and Andrew Schwartzman of the Institute for Public Representation.

"We believe that the only reasonable and prudent action under your fiduciary duty as Tribune directors is to abandon the proposed sale to Sinclair Broadcast Group and focus entirely on the responsible management of your company," the critics said, arguing that the hearing designation was likely a fatal blow anyway.

They said that because Tribune's obligation to consummate the deal is conditioned on Sinclair's representations being truthful, and because the FCC has unanimously determined that Sinclair may have lacked candor in possible violation of law, Sinclair has failed to satisfy one of its commitments--that all its representations to the FCC be "true and correct in all respects," and Tribune can terminate the deal now, before an Aug. 18 breakup date, without any financial penalty.

If the board members do not abandon the merger, the deal critics said, those members have only one option: resign.

"As demonstrated by the abandoned Comcast/Time Warner Cable, AT&T/T-Mobile, DISH/DIRECTV, and other would-be mergers designated for hearing by the FCC, an HDO is a material impediment to closing a transaction," they point out. "Moreover," they said, "terminating the merger agreement would best serve the interests of Tribune's shareholders, employees, and viewers. Tribune Media shares decreased from a high of $42.20 on July 24, 2017, to $32.79 on July 16, 2018, representing hundreds of millions of dollars in lost market capitalization. Nothing in the FCC’s recent action suggests a reversal of this downward trend."

“Tribune Media has now had the opportunity to review the FCC’s troubling Hearing Designation Order," the company said Thursday (July 19) following the FCC's release of the order, signaling it would survive if the deal were scrapped. "We are currently evaluating its implications and assessing all of our options in light of today’s developments.“We will be greatly disappointed if the transaction cannot be completed, but will rededicate our efforts to running our businesses and optimizing assets. Thanks to the great work of our employees, we are having a strong year despite the significant distraction caused by our work on the transaction and, thus, are well-positioned to continue maximizing value for our shareholders going forward.”