A shareholder in Tribune Media Co. has filed a new class action complaint in Delaware federal court, alleging that a proposed $3.9 billion merger with Sinclair Broadcast Group Inc. undervalued the Chicago-based conglomerate and boxed other potential buyers out of the bidding process.
The latest challenge, from shareholder David Pill, now joins two others in trying to halt the deal under the Securities and Exchange Act of 1934.
The lawsuits all target a June 3 filing with the U.S. Securities and Exchange Commission, which the plaintiffs said contained incomplete or misleading information regarding projections from both companies and Tribune's financial advisers. In his complaint, filed Monday in U.S. District Court for the District of Delaware, Pill also alleged that the Tribune board adopted a slate of deal protections that "virtually assures" the deal would be consummated, including a no solicitation clause, matching rights and a $135.3 million termination fee that Sinclair would receive if Tribune backs out of the merger.
"The likelihood of a competing bidder emerging to purchase the company at a higher price is significantly handicapped because the board agreed to include in the merger agreement certain deal protection devices that will prevent alternative acquirors from submitting higher offers for the company," Pill's attorneys Brian D. Long and Gina M. Serra, of Rigrodsky & Long, said in the filing.
Tribune and Sinclair announced the deal on May 8. Under the terms of the agreement, Sinclair would purchase all outstanding shares of Tribune's Class A and B stock for $35 in cash and 0.23 shares of Sinclair stock.
Pill said the implied per share deal price of $43.50 rated about 10 percent lower than the $48 per share target price independent stock researcher BWS Financial had set on the same day the deal was announced. But it also would significantly diminish the influence former Tribune stockholders would yield in the post-merger company.
"Following the closing of the merger, Tribune's current shareholders will only own approximately 17 percent of the post-merger entity, significantly diluting their already undervalued interest," he said, citing Tribune's June 3 SEC filing.
Sinclair, known for its right-leaning politics, currently operates 173 television channels in 81 U.S. markets, according to its website. And its planned acquisition of Tribune would increase its footprint to 233 stations in 108 markets across the country, Sinclair said in a statement announcing the deal.