Sinclair Restructures Allbritton Deal in Wake of FCC Crackdown on Sidecar Deals

TV group was worried that FCC would hold up deal review

Seeing the writing on the wall at the Federal Communications Commission, Sinclair Broadcast Group said late Thursday it would restructure its deal to buy Allbritton's TV group. As part of the restructuring, Sinclair will no longer propose to enter into shared service and joint sales agreements in three markets where it is adding ABC affiliates from Allbritton.

Sinclair's change of heart comes as FCC chairman Tom Wheeler has set his sights on curbing such arrangements, calling them end runs around the agency's ownership limits. The commission is scheduled to vote at the end of the month on a new rules to crack down on joint sales agreements; and last week took the unusual step of issuing new guidance for how it would review shared service agreements going forward.

That put Sinclair in a bind, which watched its stock price plunge in the wake of the FCC's proposed rules for JSAs and SSAs. Worried that the FCC could delay approval of the $985 million deal beyond its planned closing date in July, Sinclair said it decided to change its plans.

"Sinclair is concerned that the process for review of applications which propose combinations of sharing arrangement and contingent financial interests…would result in undue further delays to processing of the applications and may result in the parties being unable to consummate the proposed transactions by the outside date," the company said in its FCC filing on Thursday. "Sinclair is also aware that the commission is considering a report and order which would make certain joint sales agreements attributable and which would effectively prohibit the creation of new joint sales agreements, including pursuant to currently pending transactions."

Instead of providing services to some stations, Sinclair will now sell stations in Birmingham, Ala.; Charleston, S.C.; and Harrisburg, Penn. and terminate certain JSAs and SSAs in those markets. The FCC singled out all three markets in a letter it sent to the TV group at the end of the year.

The FCC's proposal to restrict JSAs and SSAs reverses prior approvals of some 50 similar deals since 2011. The deals, in small and medium size markets, vary, from sharing a helicopter, to providing news services, to selling airtime. But when recent TV group deals, such as Gannett-Belo and Sinclair-Allbritton proposed to include "sidecar" arrangements, Wheeler became alarmed, taking action on an issue that groups like Free Press have been raising for years.

Both FCC GOP commissioners have spoken out against Wheeler's proposal arguing it could hurt financially-strapped stations in small markets, particularly those that are minority-owned or that offer minority or other niche programming. On Thursday, commissioner Ajit Pai's office released the results of some research that found that 45 percent of female-owned TV stations and 75 percent of African-American-owned stations are parties to JSAs.

"These findings raise serious questions," Pai said. "Why is the FCC targeting pro-competitive sharing arrangements that appear to disproportionately benefit female and African-American broadcasters? Why is the FCC rushing to a vote rather than taking the time to gather basic facts and study the effect of its proposal on ownership diversity?"


Recommended articles