Sinclair countersues Tribune Media over failed tie-up

WASHINGTON (Reuters) - Sinclair Broadcast Group Inc SBGI.O on Wednesday filed a counterclaim to a lawsuit by Tribune Media Co TRCO.N seeking $1 billion for what Tribune said was a breach of contract over a proposed merger.

FILE PHOTO: The tower of Tribune Broadcasting Los Angeles affiliate KTLA 5 is seen in Hollywood, Los Angeles, California, U.S., July 17, 2018. REUTERS/Lucy Nicholson/File Photo

Tribune terminated its $3.9 billion sale to Sinclair on Aug. 9 and filed a lawsuit, saying the rival TV-station owner mishandled efforts to get the transaction approved by taking too long and being too aggressive in its dealings with regulators.

In its counterclaim in Delaware Court of Chancery, Sinclair rejected Tribune’s allegations and suggested the companies had been very close to winning U.S. Department of Justice approval. The deal was scuttled when the Federal Communications Commission (FCC) took the unusual step of referring it to an administrative judge for review and questioned Sinclair’s candor over the planned sale of some stations.

Sinclair’s lawsuit said Tribune had pursued a “deliberate effort to exploit and capitalize on an unfavorable and unexpected reaction from the FCC to capture a windfall for Tribune.”

Tribune said Sinclair’s counterclaim “is entirely meritless and simply an attempt to distract from its own significant legal exposure resulting from its persistent violations of Tribune’s contractual rights.”

Sinclair Chief Executive Officer Chris Ripley said in a statement the company “fully complied with our obligations under the merger agreement and worked tirelessly to close the transaction. The company looks forward to vigorously defending against Tribune’s claims and pursuing our own claim.”

Sinclair announced in May 2017 that it had agreed to buy Tribune’s 42 television stations in 33 U.S. markets and cable network WGN America, a move that would allow it to reach about 70 percent of U.S. households.

Sinclair said FCC chairman Ajit Pai raising “serious concerns” about the deal in July was “a stunning and wholly unexpected announcement.”

Pai told the FCC inspector general in a report released on Monday that he called Sinclair’s general counsel the following day to provide the company an opportunity to withdraw the merger application before it was referred for a hearing.

Sinclair said Tribune had omitted “an inconvenient truth” - that the companies reached an agreement-in-principle with the Justice Department in mid-July and were on track to get approval before an Aug. 8 deadline.

Sinclair also said it had told Tribune it would agree to extend the merger agreement by three months and later suggested an additional six months to try to obtain FCC consent, but did not win agreement from Tribune.

Reporting by David Shepardson in Washington and Arjun Panchadar in Bengaluru; Editing by Saumyadeb Chakrabarty and Grant McCool