FCC chairman moves to block Sinclair-Tribune mega deal

Federal regulators on Monday moved to stop Sinclair Broadcast Group’s $6.6 billion acquisition of Tribune Media.

Citing “serious concerns” about Sinclair’s divestiture of certain assets — sales that were proposed in order to gain antitrust approval — FCC Chairman Ajit Pai said he planned to present his objections to the deal to an administrative judge.

Pai’s move is a surprise as Sinclair was expected to gain FCC approval to clear the deal last Friday.

“Based on a thorough review of the record, I have serious concerns about the transaction,” Pai said in a statement. “Certain station divestitures that have been proposed to the FCC would allow Sinclair to control these stations in practice, even if not in name, in violation of the law.”

The FCC is now calling for a hearing to “get to the bottom of the disputed issues,” Pai said.

Sinclair proposed selling stations in 10 markets to stay under the 39 percent national audience cap. But some of the sales that were proposed were unorthodox — and in some cases involved joint service agreements with the buyers.

These are like sale-leasebacks, where Sinclair retained ownership though it would not operate the stations and would have the right to buy them back if the regulatory rules changed.

Investors seemed unnerved by the surprise FCC move.

Sinclair shares, which were halted in trading Monday morning pending the FCC move, were trading down 5.0 percent, to $31.30, at 12:19 p.m. Tribune Media shares were down 12.6 percent, to $33.72.

Among the controversial asset sales, Sinclair would sell Chicago’s WGN — which it would get with the Tribune buy — to a station owner that does not seem independent.

“The FCC wants to see more air between the buyers and the company,” a source following the situation said.

That is despite the Department of Justice being comfortable with the divestiture plan.

Now, the next question is if Tribune Media asks for more money in order to extend the merger agreement beyond the Aug. 8 deadline, the source said.