(RTTNews.com) - Tribune Media Co. (TRCO) said Thursday that it has terminated a $3.9 billion deal to be acquired by Sinclair Broadcast Group, Inc. ( SBGI ) and filed a lawsuit against the company for alleged breach of contract. In addition, Tribune reported second-quarter financial results that beat analysts' estimates.
Tribune's lawsuit, filed in the Delaware Chancery Court, seeks compensation for all losses incurred as a result of Sinclair's material breaches of the merger agreement.
Tribune noted that in the merger agreement, Sinclair had committed to use its reasonable best efforts to obtain regulatory approval as promptly as possible.
Instead, Sinclair in an effort to maintain control over stations it was obligated to sell, engaged in "unnecessarily aggressive and protracted negotiations" with the Department of Justice and the Federal Communications or FCC over regulatory requirements, and refused to sell stations in the markets that were required to obtain approval, Tribune noted.
Further, Sinclair also proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay.
U.S. Federal Communications Commission or FCC Chairman Ajit Pai has been vocal in his opposition to the deal. Ultimately, the FCC concluded unanimously that Sinclair may have misrepresented or omitted material facts in its applications so as to circumvent the FCC's ownership rules.
Accordingly, the FCC put the merger on indefinite hold while an administrative law judge will decide whether Sinclair misled the FCC or acted with a lack of candor, Tribune said.
Peter Kern, Tribune Media's Chief Executive Officer, said, "This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable."
Tribune also reported second-quarter net income of $84.4 million or $0.96 per share, compared to net loss of $30.4 million or $0.35 per share last year. Adjusted earnings were $0.99, compared to $0.36 per share a year ago.
Revenues grew 4 percent to $489.4 million from $469.5 million in the year-ago period.
On average, analysts polled by Thomson Reuters expected the company to earn $0.64 per share on revenues of $482.55 million. Analysts' estimates typically exclude special items.
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