Forget that Weed Wacker stored in the back corner of FCC Chairman Ajit Pai‘s office in Washington, D.C. Sinclair Broadcast Group and Tribune Media on Monday morning were each struck with a cattle prod any Kansas rancher would likely approve of.
In a statement that immediately put the future of the media companies’ controversial merger in serious doubt, Pai revealed that he has “serious concerns” over how Sinclair intends to combine the two companies.
Each company took its time to digest the news, with Sinclair refraining from comment until after the first Tuesday morning newspaper deadlines passed. Once Sinclair spoke up, it wasn’t shy about its thoughts on the matter, which bring new light to the history of Cunningham Broadcasting.
Sinclair acknowledged Pai’s statement, released at 11:15am Eastern, announcing the circulation of a draft hearing designation order regarding Sinclair’s pending acquisition of 100% of the issued and outstanding shares of Tribune Media with a lengthy reply distributed late in the day Monday.
To say the Hunt Valley, Md.-based broadcast company is at a loss for words is incorrect. Rather, it’s “shocked and disappointed,” suggesting that Sinclair C-Suite executives were totally caught off guard by Pai’s bombshell statement.
Sinclair then made reference to a report from Reuters that offers tidbits of the actual Hearing Designation Order, which has not yet been released. “[P]ress reports indicate that a leaked version of the HDO suggests that Sinclair may have engaged in misrepresentation or lack of candor,” the company said. “To the extent that the HDO does in fact include any such allegations, we deny such allegations in the strongest possible manner.”
Sinclair then explained how it had “numerous meetings and discussions” with the Media Bureau throughout the FCC review process “to make sure that they were fully aware of the transaction’s structure and basis for complying with FCC rules and meeting public interest obligations.”
These structures, the company said, “are consistent with structures that Sinclair and many other broadcasters have utilized for many years with the full approval of the FCC.”
Further, Sinclair said, “We have been completely transparent about every aspect of the proposed transaction. We have fully identified who the buyers are and the terms under which stations would be sold to such buyer, including any ongoing relationship we would have with any such stations after the sales. We have filed all relevant agreements documenting such terms as required by FCC rules.”
“While we understand that certain parties which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, a situation we are prepared to address if the FCC agrees with such views, at no time have we misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition. Any suggestion to the contrary is unfounded and without factual basis.”
Even so, Pai and Democratic Commissioner Jessica Rosenworcel clearly aren’t comfortable with Sinclair’s “transparency.” As RBR+TVBR has reported, WGN-9 in Chicago is being transferred from “WGN Continental Broadcasting Co.” to “WGN TV Licensee LLC.” This puts the Tribune flagship broadcast TV station in the hands of Steven B. Fader, who was President/CEO of Summa Holdings Ltd. in 1997 and brought in David D. Smith, then-President/CEO of Sinclair and now Executive Chairman, as a partner.
In New York WPIX-11 is being transferred from “WPIX LLC” to the similarly named licensee “New York (WPIX-TV) Licensee Inc.” This entity is wholly controlled by Cunningham Broadcasting Corp., and its officer and director, Michael Anderson. However, what has not been regularly reported is the ownership structure of this entity, which enjoys shared service agreements, lease management agreements and time brokerage agreements with a host of Sinclair stations.
More than 90% of the outstanding shares of Cunningham Broadcasting are controlled by trusts held by the children of Sinclair founder Julian Smith, who died in April 1993 at age 72. His wife: Carolyn Beth Cunningham.
A quick history of Cunningham Broadcasting puts Pai’s concerns — and those of many deal detractors — into clear view. Cunningham was born out of Glencairn Ltd., created in 1994 by former WPTT-TV in Pittsburgh GM Edwin Edwards as a way for Sinclair to continue operating the station, via a shared service agreement, following Sinclair’s purchase of WPGH-TV in Pittsburgh.
For many, Glencairn was a shining example of how minority broadcasters could grow in a consolidating marketplace, as Edwards is black. For others, this shrouded the fact that Carolyn Cunningham controlled the majority of Cunningham Broadcasting’s stock.
Glencairn grew throughout the 1990s. By 2001, it tried to merge with Sinclair.
The FCC said no, as this would have created the need for multiple duopoly waivers.
The result: Glencairn sold five stations to Sinclair and became Cunningham Broadcasting.
In its statement released Monday evening, Sinclair said, “While we understand that certain parties which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, a situation we are prepared to address if the FCC agrees with such views, at no time have we misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition. Any suggestion to the contrary is unfounded and without factual basis.”
With Pai and Rosenworcel clearly against the Sinclair-Tribune merger as it stands, attention has been placed on Republican Commissioners Brendan Carr and Michael O’Rielly as to who will cast the third vote that would set an ALJ hearing. While media reports suggest O’Rielly will vote in the affirmative, Sinclair was “heartened” by a statement O’Rielly released Monday that objected to the idea of the FCC “blindly sending decisions to the Commissioners’ Administrative Law Judge.”
Sinclair said, “While we understand that Commissioner O’Rielly was specifically objecting to the lack of defined timelines in the ALJ process, we hope that Commissioner O’Rielly and the other FCC Commissioners will also consider the appropriateness of blindly designating matters for hearing which have been fully disclosed to the FCC and which fully comply with FCC rules and widespread industry precedent.”
Does Sinclair fear that its Tribune transaction is in jeopardy? Nope.
“We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media,” it said, short of suggesting that Cunningham Broadcasting not be the recipient of any spinoff stations held in trust by RAFAMEDIA.
Rather, Sinclair reiterated that the merger “will create numerous public interest benefits and help move the broadcast industry forward at a time when it is facing unprecedented challenges.”
It not state what those public interest benefits are; groups such as the Parents Television Council have argued to the contrary.
Meanwhile, the response to Pai’s statement delivered by Tribune Media was far more subdued, and to the point.
“Tribune Media was disappointed to learn that the Chairman had circulated an order designating certain issues for consideration by an Administrative Law Judge,” the company said Tuesday morning. “It will review the FCC’s hearing designation order when released and expects to work with the FCC to explore ways to address the concerns identified. Until we have reviewed the order it is difficult to explain the potential issues it might create for the transaction. Fortunately, Tribune’s operations have been strong in 2018 and our team has done a terrific job of maximizing the value of the business through this extended regulatory approval process.”
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