But the FCC had issues with the way Sinclair was approaching these sales and was concerned the company could buy the stations back after the merger was complete.
Tribune Media has backed out of its proposed $3.9 billion merger with Sinclair Broadcast Group and said it will be filing a lawsuit against the broadcasting giant for allegedly breaching their merger agreement.
The breakup of the deal is a stinging defeat for Sinclair, owner of dozens of local television stations.
Sinclair refused to sell stations in the markets as required to obtain regulatory approval, according to Tribune's release, prompting the FCC to put the merger on indefinite hold.
"This uncertainty and delay would be detrimental to our company and our shareholders".
Tribune filed the lawsuit against Sinclair, the largest USA broadcast station owner, alleging material breach of contract over its failure to win over regulators 15 months after the merger was first announced.
Tribune's reversal Thursday came after federal regulators questioned Sinclair's honesty last month and requested a hearing about the matter.
Complicating matters is that Pai is under investigation for relaxing FCC rules to allow groups like Sinclair to add more stations.
The lawsuit, filed in Delaware Chancery Court on Thursday morning, uses similarly tough language regarding Sinclair and seeks damages "including but not limited to approximately $1 billion of lost premium to Tribune's stockholders and additional damages in an amount to be proven at trial".
"Tribune's decision to pull the plug on the Sinclair merger is great news for consumers who will avoid paying the higher pay-TV rates the deal would have caused", ACA CEO Matthew Polka said. Odds may have seemed to favor Sinclair partly because of the broadcaster's conservative leanings and Sinclair Chairman David Smith's meetings with President Donald Trump.
The FCC did not immediately comment on Thursday.
"We think that it is likely that another suitor will emerge for Tribune in the near-term", Kenneth Duffel, an analyst with KDP Investment Advisors, said in a note.
Tribune pointed to the same problems that the FCC found in Sinclair's proposal to divest some stations in order to stay under federal ownership limits.
The Sinclair Broadcast Group deal to acquire KTLA's parent company Tribune Media is over. Subsequently, the FCC voted to subject Sinclair's divesture plan to a hearing before an administrative law judge, further delaying completion of the transaction.
Under the terms of the deal, Tribune and Sinclair had the right to call off the merger without paying a termination fee if it was not completed by August 8.
Had the merger with Tribune Media been approved, Sinclair would have completely dominated the local news market.