CBS Inc. yesterday subpoenaed broadcasting magnate Ted Turner in an attempt to determine whether Turner's purported plans to make a takeover offer for CBS are somehow connected to the efforts of a politically conservative group which is also trying to gain control of the broadcasting and media giant.
Turner could not be reached for comment. But sources close to him have said that he is not allied with the conservative group, Fairness in Media, which numbers among its supporters Sen. Jesse Helms (R-N.C.).
The subpoena was issued as part of CBS' suit against Fairness in Media. The suit charges the group with violations of federal securities laws, improper political activities by tax-exempt organizations and illegal corporate political contributions, all in connection with Fairness in Media's drive to take over CBS to correct what the group sees as the CBS Network News operation's liberal bias.
Turner, the owner of Cable News Network and the Atlanta-based WTBS cable-TV "superstation," is considering an attempt to take over one of the three major television networks, most likely CBS, it was disclosed last week. A representative of Turner has met with members of the Federal Communications Commission in an attempt to determine whether the commission would block an unprecedented hostile takeover of broadcast properties.
Industry analysts say they doubt that Turner is working with Helms and the Fairness in Media group. But Wall Street sources say that Turner probably would have to bring in outside investors of some sort to enable him to acquire one of the major television networks.
Turner is restricted by the terms of a stock offering his Turner Broadcasting System conducted last December to raise money for general business activities, according to several analysts. The cheapest of the networks would sell for $2.5 billion.
"It's highly unlikely that Turner could go ahead," said one Wall Street banker, who asked not to be identified. "There are restrictions placed on his use of any money he draws under the bank indebtedness."
According to a prospectus of that Turner Broadcasting System Inc. stock offering, Turner raised $191 million to repay bank debts and build up existing communications businesses. But after paying $133.7 million in bank debts, the company was left with only $57.3 million in cash.
With an additional $190 million credit line, that leaves Turner a total acquisition fund of $247.3 million -- far short of what he would need to take over a network.
Turner is also prohibited under the terms of the loan from spending more than $15 million in any fiscal year on anything except what is needed for his business. He is specifically prohibited from "any acquisition, merger or consolidation of any sale of assets" without bank approval.
Pledged to the banks are Turner's personal holdings of 16.6 million shares of TBS common stock and 600,000 warrants.
"He has exploited his financing opportunities and I don't see how he can come to the well again -- he's over-leveraged," said another Wall Street source who declined to be identified.
Some analysts said a leveraged buyout, whereby Turner would use CBS assets as collateral to finance a hostile takeover, was not altogether out of the question, but Turner would need at least one partner.
"It's way beyond his realistic means," said Fred Anschel, an analyst with Dean Witter Reynolds Inc. "He will need enough major investors that he may not even end up with absolute control . . . . I tend to be skeptical."
Recent hostile takeover attempts by T. Boone Pickens Jr. and Carl Icahn for Phillips Petroleum Co. indicate that certain investment banking firms and others sometimes are willing to help arrange financing to make these raids possible. The broadcasting industry may not be immune from the same tactic, analysts said.
"It is feasible a company such as Turner could buy CBS on a leveraged buyout basis," said Barbara Russell, a media analyst with Prudential Bache Securities Inc.
"Then you'd have to figure out what to do with the CBS divisions such as publishing and records that don't fit in and see what kind of interest burden and debt loan you'd have after you spun them off.
"Then, the issue of the FCC. The more you add up these pieces . . . it just doesn't seem feasible," Russell said.