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%.

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.

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

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.