Sinclair Broadcast Group Inc. will likely face demands to sell TV stations in at least 10 cities to satisfy regulators who are wrapping up a review of the company's plan to buy Tribune Media Co. — a $3.9 billion deal that would create a national broadcasting giant.
FCC staff members in a recent discussion focused on completing the review by a self-imposed deadline of Jan. 17, according to a person familiar with the deliberations who spoke on condition of anonymity because proceedings aren't public.
The deal would create a coast-to-coast string of stations exceeding current ownership limits and Sinclair has acknowledged that it might have to sell some of the stations. It would also give a broadcaster known for its conservative leanings fresh reach into leading media markets including New York, Los Angeles and Chicago.
Any sales to secure antitrust clearance from the Justice Department will most likely come in the 10 localities where both Sinclair and Tribune stations are affiliated with major networks, Bloomberg Intelligence analysts Jennifer Rie and Matthew Schettenhelm said in a note.
The Justice Department is working alongside the Federal Communications Commission, which has been loosening media-ownership restrictions under Chairman Ajit Pai, a Republican chosen by President Donald Trump. In a Jan. 4 meeting with the FCC, Sinclair executives "discussed the general status of Sinclair's divestiture plan and Sinclair's communications with the Department of Justice," according to a Jan. 8 filing.
Sinclair in the filing said it may seek FCC permission to leave intact station combinations in the 10 overlap localities, a possibility since the agency in a November vote relaxed restrictions on owning multiple stations in a locality.
In addition to meeting market-by-market local restrictions, the combination faces another limit: a national audience cap. As proposed, Sinclair would hold stations reaching 45.5 percent of U.S. households, compared with the FCC's limit of 39 percent. In other mergers that would have exceeded TV ownership limits, companies have offered the FCC a firm plan for divestitures to come into compliance as a prelude to agency action, indicating Sinclair would need to make an offer.
"Sinclair still needs to explain how it will honor the national cap," Schettenhelm said in an interview Monday. "It's never given a clear answer."
Sinclair in an October filing said it would need to sell stations in at least two markets to meet the national limit, but added "it is premature" to offer specific promises since the Justice Department might demand divestitures, affecting the company's plans. An FCC review of the national cap also could change the landscape, the Maryland-based broadcaster said in the filing.
Since then the agency has started its review of the national cap. It hasn't set a deadline nor declared whether it will relax the limit.
The deal for Tribune's 42 stations would boost Sinclair, which already has almost 200 stations, into a leading broadcaster serving more than 70 percent of U.S. households, including major markets such as New York and Chicago.
On Tuesday the deal was on the 172nd day of its planned 180 days of consideration at the FCC, where Pai has long called for not delaying merger reviews. At one point he even called for a rule to force the agency to adhere to the 180-day schedule; it's now voluntary.
Unless the FCC changes course, the 180-day mark will be reached Jan. 17.
Pai has sought to cut regulations and has called past FCC merger conditions "ideologically inspired extortion."
Mark Wigfield, an FCC spokesman, declined to comment as did Lauren Ehrsam, a Justice Department spokeswoman. Rebecca Hanson, Sinclair's senior vice president for strategy and policy, declined to comment.
Critics have said a combined Sinclair-Tribune would have enough heft to demand price increases from pay-TV providers in return for carrying its stations' signals, especially in markets where it would hold more than one station. Sinclair will have so many stations it could delay the planned process of reassigning TV stations to new airwaves, delaying wireless carriers' use of the frequencies they won at an auction, the Competitive Carriers Association with providers including carriers T-Mobile US Inc. and U.S. Cellular Corp. said in a filing.
Sinclair Chief Executive Officer Chris Ripley on Nov. 1 told investors negotiations with the Justice Department about local advertising markets were "an ongoing process." Sinclair thinks cable operators should be included when officials consider whether its TV stations may dominate a market, Ripley said.
A broader market would leave Sinclair holding a smaller portion of the ad business, helping to lessen arguments that it's sufficiently dominant to pose a risk of squelching competition.
Stephen Marks, Sinclair's chief operating officer, said of the Justice Department, "They are not aligned with realities of the marketplace."
The company's divestiture plan "is going to be driven by the DOJ's result," Ripley said. He said the company anticipates the transaction will close "in early 2018."
Bloomberg's David McLaughlin contributed.