Sinclair Shares Spike On $1B Buyback Plan

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On Thursday, August 8, 1974, Richard Nixon resigned as President of the United States.


Forty-four years later, Tribune Media has resigned from its merger agreement with Sinclair Broadcast Group.

With headlines grabbing the attention of broadcast media outlets far and wide and Tribune controlling the conversation through the lunch hour, Sinclair finally responded in the early afternoon hours of Thursday (8/9).

Its FCC applications have been withdrawn with prejudice, and it is initiating a huge stock repurchasing plan. Investors immediately signaled their approval, sending SBGI into positive territory.

In the first of two consecutive announcements from Hunt Valley, Md.-based Sinclair, the company revealed that, to little surprise, it responded to Tribune’s termination notice by yanking its FCC acquisition applications. As such, it filed with the Commission’s Administrative Law Judge a notice of withdrawal of the applications and a motion to terminate the hearing.

This renders the FCC’s Hearing Designation Order moot, as there is no longer a deal for the ALJ to adjudicate.

The actions all but unwind a deal that just eight months ago seemed all but certain. Efforts that began with a report on HBO’s Last Week Tonight, hosted by John Oliver, ultimately led FCC Chairman Ajit Pai to seriously question arrangements that until now had been considered to be perfectly legal. Cunningham Broadcasting, a shared services partner, is separately operated from Sinclair. But, its controlling shareholders were found to be heirs of one of Sinclair’s founders. Further, a sale of WGN-9 in Chicago was questioned as the buyer had no prior broadcast ownership experience and was a longtime associate of Sinclair’s now-retired former Chairman/CEO.

With a $1 billion lawsuit filed Thursday morning by Tribune against Sinclair in a Delaware Chancery Court, Sinclair has an uphill climb. But, it is proving that its leadership is up for the task.

This includes Sinclair President/CEO Chris Ripley.

“We are extremely disappointed that after 15 months of trying to close the Tribune transaction, we are instead announcing its termination,” said Ripley, who reiterated the company’s position on how it went about seeking a merger with Tribune. “We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency.”

He added that the decision by Tribune to terminate the merger came as the FCC’s HDO would have resulted “in a potentially long and burdensome process.” As such, Ripley concluded, “pursuing the transaction was not in the best interest of their company and shareholders.”

As for Tribune’s lawsuit, Ripley said, “We fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction. The lawsuit described in Tribune’s public filings today is entirely without merit, and we intend to defend against it vigorously.”

Nonetheless, Ripley took a moment to both Sinclair staffers and Tribune’s employees and the advisers who “committed a tremendous amount of time and effort over the past 15 months towards the acquisition of Tribune.”

Ripley noted, “It is unfortunate that those efforts have not been realized. The combined company would have benefited the entire broadcast industry and the public through the advancement of ATSC 3.0, increased local news and enhanced programming.”

The other big afternoon announcement from the suburban Baltimore headquarters of Sinclair involved a significant stock repurchase plan. The company’s Board of Directors has given the green light to buying back up to $1 billion of SBGI Class A common shares.

This news swung Sinclair from a decline from Wednesday’s closing price to a gain of 2.8% as of 2:36pm Eastern.

Commenting on the share repurchase, Sinclair President/CEO Chris Ripley said, “It is unfortunate that Tribune Media terminated our merger agreement. Nonetheless, we strongly believe in the long-term outlook of our company and disagree with the market’s current discounted view on our share price. The $1 billion authorization does not use our future free cash flow generation, but simply the excess cash currently on our balance sheet.”

The new $1 billion repurchase authorization is in addition to Sinclair’s existing share repurchase authorization, of which approximately $89 million of repurchase capacity remains.

The new share repurchase authorization has no expiration date.

The timing of share repurchases and the number of Class A common shares to be repurchased will depend upon prevailing market conditions and other factors.

Repurchases will be made using Sinclair’s existing cash resources and may be commenced or suspended at any time or from time-to-time at its discretion without prior notice, the company said.