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A
deal between Sinclair and Tribune Media, which have market
capitalizations of $3.6 billion and $3 billion respectively,
would combine two of the largest U.S. local TV station owners
and face regulatory curbs on how many households they can reach.
However, the broadcast industry hopes President Donald Trump
will lift caps on ownership concentration, allowing it to
compete for audiences and advertisers against Facebook Inc and
Alphabet Inc's Google.
The discussions between the companies are preliminary and there
is no certainty they will lead to any deal, the people said.
Sinclair could also look at buying parts of Tribune such as the
dozen CW broadcast stations it owns, or its media holdings such
as the WGN America cable network and its stake in the Food
Network, the people added.
The sources asked not to be identified because the matter is
confidential. Tribune Media declined to comment, while Sinclair
did not respond to a request for comment.
An acquisition of Tribune would come as the Chicago-based
company faces higher programming costs and a challenging
advertising environment.
Tribune's chief executive, Peter Liguori, has said he is
stepping down this month, and the company has yet to name a
permanent replacement. In February, Starboard Value LP, an
activist hedge fund known for calling on companies to change
their strategy, disclosed a 6.6 percent stake in the company.
Sinclair branched out into cable networks last year when it
bought the Tennis Channel for $350 million.
If the companies decide to combine, they would collectively
reach more people than the U.S. Federal Communications
Commission (FCC) currently allows for. Unless grandfathered in,
no broadcast group is allowed to reach more than 39 percent of
U.S. households.
However, Congress has increased the cap before, and many in the
industry expect Trump to relax the rules on the ownership of
broadcast stations. Sinclair and Tribune could also seek a
waiver to go above the cap as part of a deal, the sources said.
Tribune is already above the FCC cap, reaching 44 percent of
U.S. households, while Sinclair is at 38 percent, according to
Jefferies LLC analyst John Janedis.
Tribune Media said last year that it was working with financial
advisers, Moelis & Co and Guggenheim Securities, on a strategic
review. It subsequently sold its media data unit Gracenote to
Nielsen Holdings Plc for $560 million.
Tribune is due to report earnings later on Wednesday.
(Reporting By Jessica Toonkel in New York and Liana B. Baker in
San Francisco; Editing by Stephen Coates)
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