FCC Commissioners on Wednesday unanimously approved a hearing designation order (HDO) regarding the Sinclair-Tribune merger, sending it to a judge for administrative law review and likely dooming the chances of the $3.9 billion deal happening.
The order, released Thursday, calls into question three proposed station sales, and whether they “were in fact ‘sham’ transactions,” as the buyers have ties to Sinclair, purchase prices appear to be “significantly below market value,” and certain agreements effectively leave Sinclair in control of station operations.
The stations include KDAF-TV Dallas, KIAH-TV Houston and WGN-TV Chicago.
“We are unable to find, based upon the record before us, that grant of the applications would be consistent with the public interest,” the FCC said in the HDO.
The order points to the proposed sale of WGN-TV to Steven Fader, noting he has no prior broadcasting experience and is the CEO of a company that Sinclair’s executive chairman David Smith has a controlling interest in.
“Moreover, Sinclair would have owned most of WGN-TV’s assets, and pursuant to a number of agreements, would have been responsible for many aspects of the station’s operations.”
The sale price for the station of $60 million is well below market value, the FCC said, using the 2002 sale of WPWR-TV Chicago to Fox Television Stations for $425 million as a comparison. Additionally, Sinclair would have had an option to buy back the station at a later date.
“Such facts raise questions about whether Sinclair was the real party in interest under commission rules and precedents and attempted to skirt the Commission’s broadcast ownership rules,” the FCC said.
Sinclair earlier this week withdrew the three applications in question, but the order states that “material questions remain because the real party-in-interest issues in this case includes a potential element of misrepresentation or lack of candor that may suggest granting other, related applications by the same party would not be in the public interest.”
Sinclair for its part has strongly denied any allegations of misrepresentation or lack of candor, saying it gave full disclosure about the proposed station sales in all of its meetings with the agency.
The broadcast giant’s effort to remedy the station issues did not appease the commission, which will not consider the amended divestiture plan.
“Given the seriousness of the issues presented, we direct the Media Bureau to hold in abeyance all other pending applications and amendments thereto related to the overall proposed Sinclair-Tribune transaction until the issues that are the subject of this Hearing Designation Order have been resolved with finality,” the FCC said.