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Sinclair-Tribune Deal in Trouble as FCC Raises Concerns
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Sinclair Broadcast Group’s (SBGI - Free Report) acquisition of Tribune Media’s 33 stations is likely to undergo further scrutiny with Federal Communications Commission (FCC) chairman Ajit Pai expressing worries regarding the combined company’s market presence.
In May 2017, Sinclair entered into an agreement for purchasing 42 TV stations of Tribune Media that would have made the former the largest ownership group in the United States with around 233 stations. However, in order to comply with the ownership restrictions imposed by FCC, the company agreed to divest a few of the stations.
Of these, a notable one is WGN-TV, which a Maryland auto dealer agreed to buy in February 2018 for $60 million. However, concerns were raised when it was disclosed that a newly formed company headed by Steven Fader, a longtime business associate of Sinclair Executive Chairman would have been the licensee of WGN. Additionally, there would have been an option for Sinclair to buy back the station at the same price within eight years subject to fulfilment of certain conditions.
There were further allegations that the station would be within the Sinclair umbrella through sidecar arrangements. Reportedly, an agreement related to services would hold Sinclair responsible for several operations.
Per Karl Frisch, the executive director of Allied Progress, previously when Sinclair Broadcast Group was forced to sell its assets, it had divested those to “family and friends” and then retrieved the programming control. A recurrence of such a scenario will be harmful for the companies in the industry. Hence, proper vigilance is necessary this time.
Additionally, the acquisition of Tribune Media's stations by Sinclair is anticipated to influence Tribune’s local news. Also, the deal will have within its fold more than 39% of the national audience segment, which may lead to market consolidation.
Notably, this ongoing tussle has also negatively impacted the company’s stock that has lost 12.6% over the past year against the 35.6% gain of the industry.
We believe the pessimistic comments from the FCC representatives might delay the completion of the deal beyond the third quarter. FCC’s plan of referring the application to an “administrative law judge” might as well lead to cancellation of the acquisition transaction which might further affect investors' confidence.
Zacks Rank and Stocks to Consider
Sinclair Broadcast Group currently has a Zacks Rank #3 (Hold).
Long-term earnings growth rate for Twitter and Micron is projected to be 8.2% and 23.1%, respectively.
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Sinclair-Tribune Deal in Trouble as FCC Raises Concerns
Sinclair Broadcast Group’s (SBGI - Free Report) acquisition of Tribune Media’s 33 stations is likely to undergo further scrutiny with Federal Communications Commission (FCC) chairman Ajit Pai expressing worries regarding the combined company’s market presence.
In May 2017, Sinclair entered into an agreement for purchasing 42 TV stations of Tribune Media that would have made the former the largest ownership group in the United States with around 233 stations. However, in order to comply with the ownership restrictions imposed by FCC, the company agreed to divest a few of the stations.
Of these, a notable one is WGN-TV, which a Maryland auto dealer agreed to buy in February 2018 for $60 million. However, concerns were raised when it was disclosed that a newly formed company headed by Steven Fader, a longtime business associate of Sinclair Executive Chairman would have been the licensee of WGN. Additionally, there would have been an option for Sinclair to buy back the station at the same price within eight years subject to fulfilment of certain conditions.
There were further allegations that the station would be within the Sinclair umbrella through sidecar arrangements. Reportedly, an agreement related to services would hold Sinclair responsible for several operations.
Per Karl Frisch, the executive director of Allied Progress, previously when Sinclair Broadcast Group was forced to sell its assets, it had divested those to “family and friends” and then retrieved the programming control. A recurrence of such a scenario will be harmful for the companies in the industry. Hence, proper vigilance is necessary this time.
Additionally, the acquisition of Tribune Media's stations by Sinclair is anticipated to influence Tribune’s local news. Also, the deal will have within its fold more than 39% of the national audience segment, which may lead to market consolidation.
Notably, this ongoing tussle has also negatively impacted the company’s stock that has lost 12.6% over the past year against the 35.6% gain of the industry.
We believe the pessimistic comments from the FCC representatives might delay the completion of the deal beyond the third quarter. FCC’s plan of referring the application to an “administrative law judge” might as well lead to cancellation of the acquisition transaction which might further affect investors' confidence.
Zacks Rank and Stocks to Consider
Sinclair Broadcast Group currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Twitter, Inc. and Micron Technology, Inc. (MU - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Long-term earnings growth rate for Twitter and Micron is projected to be 8.2% and 23.1%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>