Sinclair buys Tribune to compete in major media markets

Sinclair Broadcast Group Inc. (Nasdaq: SBGI) is buying Tribune Media Co. (NYSE: TRCO) for about $3.9 billion, a deal made possible after the Federal Communications Commission voted last month to ease a limit on TV-station ownership in the U.S.

Sinclair will pay $43.50 a share for the Chicago-based broadcasting company. It will also assume debt of $2.7 billion.

The acquisition of Tribune gives Sinclair TV stations in big media markets like New York, Chicago and Miami, strengthening its hand in negotiations with pay-TV distributors and major broadcast networks. The larger scale also would help the combined company face down online competitors vying for a piece of the local advertising pie.

21st Century Fox Inc., with funding from Blackstone Group LP (NYSE: BX), had been planning an offer for Tribune but in the end didn’t submit a bid, according to a person familiar with the matter. Nexstar Media Group Inc. (Nasdaq: NXST) also was preparing an offer, according to people familiar with the matter.

The marriage of two of the largest local TV station owners in the U.S. was made easier last month when the FCC restored a rule that allows TV station groups to count just half of their coverage area for Ultra High Frequency stations to comply with a 39 percent nationwide cap set by Congress.

The FCC’s vote reversed a 2016 decision by the agency during the Obama administration. New Chairman Ajit Pai, a Republican, criticized the earlier action because it effectively tightened ownership limits without considering whether to raise the national cap.

The issue is a relic of days when UHF stations -- broadcasting on channels 14 and higher -- used signals that didn’t reach as far as stations assigned lower-numbered channels. That disappeared with the switch to digital TV in 2009.

The impetus for a 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.

Despite their respective size, Sinclair and Tribune have little overlap in the locations of their stations. Sinclair has 173 stations in 81 markets, including affiliations with Fox, ABC, CBS and NBC, and reaches 24 percent of U.S. TV homes with the UHF discount reinstated. Tribune has 42 stations reaching 26 percent. With the UHF discount reapplied, they cover 42 percent of the country, implying a likelihood of some divestitures, according to a Bloomberg Intelligence analysis.

With the deal Sinclair, based in the Baltimore suburb of Hunt Valley, gets Tribune’s minority stakes in the Food Network and its flagship cable network WGN America.

Tribune has tried to attract viewers and advertisers to WGN America with original programs like “Salem” and “Outsiders” -- and it’s worked. But higher programming costs have squeezed Tribune’s profit margin, and cable operators have slimmed down their bundles of channels, leaving networks like WGN battling for a slot.

In December, Tribune sold its Gracenote audio-recognition software business to Nielsen Co. for $560 million.