Fox Business Network’s Charlie Gasparino predicts that a three-judge panel at the U.S. Court of Appeals for the D.C. Circuit will likely rule against Sinclair Broadcast Group Inc.’s planned $3.9 billion takeover of Tribune Media.
The three-judge panel last week questioned why the Federal Communications Commission relaxed a rule on how many TV stations a network could own – effectively gutting the long-held rule keeping their reach at 39 percent of U.S. households.
Sinclair, which already is the biggest owner of TV stations in the United States, needs FCC and Justice Department approval for a deal that will give it a massive reach into 72 percent of American homes.
The FCC rule change – reinstituting an old definition that applied to UHF signal reach decades ago – was made just weeks before the Sinclair merger announcement.
“It looks like that DC Circuit Court is going to say ‘no’ to that rule change,” Gasparino told Fox Business Network’s Liz Claman.
“And that is really bad for the stock” of Sinclair, Gasparino added.
Considered one of the most-respected journalists covering Wall Street, Gasparino noted Sinclair’s stock has been “getting crushed.”
Shares of Sinclair (SBGI) were trading near midday Wednesday at $30.05. The stock is trading close to its 12-month low of $26.70.
Gasparino also said Sinclair officials are scrambling “to come up with a plan B” if the deal is scrapped.
He noted that Sinclair announced this week a sale of 23 stations as part of its divestiture plan to appease regulators concerned about competition in local TV markets.
Many of the stations put up for sale, including powerhouse WGN in Chicago, will still be controlled by Sinclair through third-party agreements.
The Justice Department had previously cracked down on such arrangements, which have been described as “shams” to circumvent federal anti-monopoly rules.
The court should decide before the end of September on the UHF discount matter.
Sinclair will likely race to close the deal before the court rules, Bloomberg Intelligence litigation analyst Matthew Schettenhelm has said.
Christopher Ruddy, the CEO of Newsmax and a prominent conservative, also has criticized the FCC rule change, saying it “threatens press freedom and a diverse local press, which has been critical for conservatives who battle against a liberal national media.”
Democrats and public-interest groups have argued against the rule change, noting it will give a handful of companies control over most major local TV stations.
FCC Chairman Ajit Pai has come under strong criticism for backing many of Sinclair’s pet agenda items, such as implementing the UHF discount.
Pai has also ended the rule requiring local broadcasters to maintain a studio in their communities and approved a new TV standard, ATS 3.0. Sinclair owns many of the key patents for the technology and could stand to reap billions from Pai’s decision.
Critics have blasted Sinclair, the beneficiary of the FCC actions, because of its “must run” political commentary and pre-packaged news segments.
One judge on the three-judge panel likened the FCC’s outdated method of counting audience sizes to keeping a moribund body on life support.
Several informed observers suggest the FCC likely will lose the court case, which was brought by policy groups that oppose media consolidation.
They want the FCC to revert to its earlier method of counting audience sizes based on actual household reach.
(Newsmax wire services contributed to this report).
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