Sinclair Outlines Divestiture Plans, Will Comply With National Cap

Sinclair will offload stations into a divestiture trust to bring its proposed buy of Tribune under the 39 percent FCC national ownership cap. The final combination, under the UHF discount, would reach 37.3 percent of households, Sinclair said in an amendment to deal filings Wednesday. In three markets, Sinclair will seek to take advantage of the FCC’s new openness to common ownership of two top-four stations in the same market, and offloads other stations to bring the deal into compliance with current rules.

Broadcast attorneys unconnected with the deal believe the commission will be receptive. Fletcher Heald's Dan Kirkpatrick “wouldn’t be surprised” if the agency approves. Sinclair is still expecting to get approval from the FCC and DOJ and close by Q2, an informed person said.

The amendment doesn’t outline a complete plan for divestiture because it doesn’t identify specific stations to be sold in every overlap market, said a broadcast attorney. It does provide a structure toward complying with the FCC, while Sinclair’s original filing didn’t identify how the deal would be brought into cooperation with the rules, the industry lawyer said.

To comply with the national cap, the broadcaster will divest stations with large audience reach in Chicago, New York and San Diego, the amendment said. The stations will be placed in a divestiture trust insulated from Sinclair’s control, under a trustee empowered to sell them. The company will collect revenue from the stations while they are in the trust, the amendment said.

Broadcast attorneys and public interest advocates said the trust could be intended to let Sinclair eventually re-acquire the stations if the national cap is ever increased or eliminated. “We have seen Sinclair play games with divestitures before,” said Free Press Policy Analyst Dana Floberg. It opposes Sinclair/Tribune. The amendment emphasizes Sinclair won’t have control over the trust.

Sinclair Senior Vice President-Strategy Rebecca Hanson disputed that view. “The sole purpose of the trust is to prevent the divestiture sales from unnecessarily delaying the Tribune closing,” she said. The divestiture plan puts Sinclair further under the cap than it needs to be, noted Kirkpatrick. Sinclair could retain its San Diego station and still come in under the cap, he said. That could suggest the company is trying to keep some options open, a broadcast attorney said.

Sinclair wants the FCC to approve top-four duopolies in the Winston-Salem market in North Carolina, the Harrisburg-Lancaster one in Pennsylvania, and for a combination already commonly owned by Tribune in Indianapolis. The showings would be the first test of new rules under the media ownership reconsideration order, and Sinclair said many of stations involved aren’t as competitive as they would be under common ownership. “The stations are third and a distant fourth in both ratings and revenues; their combined rating share is less than the rating share of the number one rated dominant station in the market,” Sinclair said of North Carolina's WGHP High Point, and WXLV-TV Winston Salem. The top-four combinations will allow Sinclair to provide increased news to those markets, the amendment said repeatedly. In several markets, Sinclair said it will provide differentiated news products at its commonly owned stations to better meet community needs. Elsewhere, Sinclair has in the past offered nearly identical news broadcasts among its commonly owned stations, Floberg said. Broadcast attorneys said it's likely Sinclair’s top-four proposals will be approved. The Indianapolis showing, which maintains the status quo of stations already commonly owned, is a “safe choice” a lawyer said.

The combination will divest stations in eight different markets where Sinclair and Tribune overlap, including Seattle, Salt Lake City and Richmond. Though the amendment says Sinclair plans to divest these stations to third parties, Sinclair is also filing divestiture trust applications for these stations and all the stations in the top four showings. That’s likely to hedge Sinclair’s bets in case any of the top-four showings aren’t approved, a broadcast attorney said.

A group of broadcasters challenged the top-four policy in a filing in the U.S. Court of Appeals for the D.C. Circuit Wednesday, arguing it doesn’t relax the rules enough. The Independent Television Group (ITG), made up of over 20 small and medium privately owned TV stations, said the case-by-case rule is “particularly harmful to television stations in small and medium markets where there may be only four or fewer commercial television stations” because it greatly restricts their growth, in a release. The appeal is likely to be transferred to the 3rd U.S. Circuit Court of Appeals to join other challenges to the media ownership reconsideration order, ITG said.