Why Sinclair Broadcast Group and Tribune Media Were Slammed Monday

What happened

Shares of television broadcasting company Sinclair Broadcast Group (NASDAQ: SBGI) took a hit Monday, falling as much as 11.8%. The stock's decline came after Federal Communications Commission (FCC) Chairman Ajit Pai expressed concerns about the company's proposed acquisition of media and entertainment company Tribune Media (NYSE: TRCO). Tribune shares were slammed as well, falling as much as 18%.

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By the time the market closed on Monday, Sinclair and Tribune were down 11.7% and 16.7%, respectively.

So what

The main area of concern for Sinclair's proposed deal seems to be with the television stations it planned to sell in order to be approved to purchase Tribune. Selling a certain number of stations before acquiring Tribune is required for Sinclair to adhere to FCC regulations. In a statement, Pai said, "Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction." The proposed divestitures would still leave Sinclair in control of the divested stations "in practice, even if not in a name," Pai said in the statement.

Now what

For now, the FCC is blocking the deal. To proceed from here, "the law requires the FCC to designate the transaction for a hearing in order to get to the bottom of those disputed issues," Pai said. The FCC chairman proposed that the hearing should take place before an administrative law judge.

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Pai's interference with the proposed merger makes a deal unlikely, according to The Wall Street Journal.

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