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Sinclair analyzes options for Tribune, eyes regional sports networks

As it continues to mull its $3.9 billion purchase of Tribune Media Co., Sinclair Broadcast Group Inc. is keeping its eyes open for acquisition opportunities in the TV station community, as well as in the regional sports networks arena.

Sinclair President and CEO Christopher Ripley in the company's second-quarter earnings release said it is still working with Tribune to "analyze approaches to the regulatory process that are in the best interests of our companies, employees and shareholders." Some observers had expected Sinclair to pass on the deal in light of the U.S. Federal Communications Commission voting unanimously to refer the deal to an administrative law judge for review, a process that could prove lengthy and expensive.

Some also think that Tribune may still walk away from the deal to find a new buyer. Under the merger agreement, the parties signed in May 2017, they set Aug. 8 as the date on which either could terminate an unconsummated deal.

At the top of the Aug. 8 earnings call, Ripley said the focus would be on results and guidance, not the proposed deal.

"Because of the developing nature of the matter surrounding the Tribune acquisition and the regulatory items, we will not be providing an update on the Tribune acquisition on the call, although we expect to be able to do so in the near future," he said.

He asked the analysts to refrain from Tribune-related questions. For the most part, they adhered to those wishes, although Ripley was asked with the Tribune deal still on the table, does that impact Sinclair's interest for other deals. In response, Ripley said there was "no change" in Sinclair's appetite for further transactions.

"We will continue to seek scale within broadcast and adjacencies," he said. "Less-regulated opportunities like with RSNs make sense from a business and value perspective. That obviously is a benefit."

Notably, as part of gaining regulatory approval for its deal to acquire myriad 21st Century Fox Inc. assets, Walt Disney Co. must divest the 22 RSNs owned by Fox.

The discussion also turned to CompulseOTT, Sinclair's new ad platform that offers 15- and 30-second commercials across more than 100 networks on various streaming devices, smart TVs and gaming consoles. The product fits a niche within both the local and national marketplaces for targeted advertising.

"We think that marketplace ... already a multibillion-dollar marketplace is underserved," said Ripley, who expects CompulseOTT to grow double-digits for the foreseeable future.

Chief Revenue Officer Rob Weisbord also said Sinclair is increasing its full-year expectation for political advertising to some $160 million, up from the $140 million to $150 million range.

Sinclair in the second quarter posted total revenues of $730.1 million, an 11.9% increase from $652.2 million in the second quarter of 2017.

Net income attributable to the company was $28.0 million, or 27 cents per share, down from $44.6 million, or 43 cents per share.

On a normalized basis, the S&P Global Market Intelligence consensus EPS estimate for the quarter was 4 cents, with four analysts reporting.