After over a year of negotiations for approval, on August 9, 2018, Tribune Media Company terminated its merger with Sinclair Broadcast Group, Inc. The mega-deal was valued at $3.9 billion and heavily reviewed by both the Department of Justice and Federal Communications Commission for antitrust and regulatory concerns. It was first announced in May 2017.
The merger’s demise was not caused by either the length of agency review time or legal concerns. In fact, it is believed that the DOJ was going to approve the deal with certain divestitures. Rather, Tribune called off the deal due to Sinclair’s alleged bad behavior. According to Tribune, Sinclair was overly aggressive with the DOJ, taunting the agency to sue. It misrepresented or omitted material facts to the FCC, conduct that agency unanimously believed severe enough to subject Sinclair to administrative hearings. The net result proved too much for Tribune to bear. Notably, the merger investigation led to a price- fixing investigation and class actions targeting Sinclair, Tribune and other local TV advertising sellers.
Sinclair may have thought it was being a zealous advocate at the time. But its conduct has subjected the company to a $1 billion lawsuit from Tribune. The claim: breach of contract for lack of best efforts. Tribune contends that Sinclair’s “belligerent,” “aggressive,” and “high risk” tactics betrayed its commitment to use its best efforts to obtain regulatory approval.
This firm has written on both the effectiveness and ambiguity of “best efforts” and related merger provisions, and what companies can do to protect themselves in just these situations. Clarity and counseling remain key. Those articles can be found here and here.
Media coverage of the Tribune/Sinclair debacle can be found here:
http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=1013178&siteid=191&rdir=1