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When Tribune Media announced yesterday that it had agreed to be acquired by Sinclair Broadcasting for $3.9 billion (not including assumed debt), I had two initial thoughts:

  1. Conservative-leaning Sinclair will now own a national cable network (WGN) that it could use to launch a Fox News rival (albeit with a massive HR insurance policy);
  2. What happened to 21st Century Fox, which was said to be working with The Blackstone Group on a rival bid?

I'm totally unqualified to deal with #1, but I did speak with a bunch of people familiar with #2. Notes:

  • Genesis: Fox partnered with Blackstone for financial reasons, rather than strategic ones. In short, Fox already had a highly-leveraged balance sheet ($6.75b in liabilities as of year-end) and didn't want to blow through 50% more of its cash ($4.5b).
  • But: FoxStone came together fairly late in the Tribune Media sale process, and simply couldn't get the offer finished in time. As such, it never submitted a formal bid. The big stumbling stock was structure, due to lingering FCC ownership rules that likely would have required Fox to either divest certain assets or create an alternate holding company (possibly controlled by Blackstone). Moreover, the structural questions also are said to have caused unresolved financing disagreements between Fox and Blackstone.
  • Auction process: Tribune Media could have extended the auction for the sake of competition, but it already had a viable alternate bidder (Nexstar Broadcasting, which submitted an offer just below Sinclair's) and it wasn't convinced that Fox and Blackstone would successfully work out their differences.
  • Go shop: It remains possible that Fox could still come in with a superior offer to Sinclair (Tribune would be on the hook for $135.5m if it accepted), particularly given that you can't rule out anything when it comes to Rupert Murdoch. But the financing hill likely would be steeper, as firms like Blackstone are typically loathe to deal-jump once an agreement is signed.

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