Top executives of Capital Cities Communications Inc. and American Broadcasting Cos. Inc. paid a courtesy call yesterday on members of the Federal Communications Commission, who will face the task of deciding what properties must be divested before the two companies merge.
Sources close to the companies said both Capital Cities Communications Chairman Thomas S. Murphy and Leonard H. Goldenson, chairman and chief executive officer of ABC, visited every FCC commissioner yesterday. "Murphy and Goldenson came down and met with all the commissioners and the chairman as a courtesy to say they had worked out a deal," said one FCC source who asked not to be identified.
No specifics were given about the companies' plan to combine in a $3.7 billion transaction, and no schedule for complying with FCC rules limiting media ownership were discussed, the source said.
Meanwhile on Wall Street yesterday, broadcasting and media stock prices skyrocketed, following Monday's announcement by Capital Cities Communications Inc. that it has agreed to acquire American Broadcasting Companies Inc. in a friendly takeover worth more than $3.5 billion.
Capital Cities, a profitable company with television, radio and newspaper properties, topped the list of incredible stock price gains today, as Wall Street voiced its approval of the proposed Capital Cities-ABC combination. Capital Cities was up 19 1/4, to close at 202 3/4, a dramatic and unusual move for the stock of a company that is on the buying side of a multi-billion dollar deal.
CBS stock was up today 3 1/2, to close at 98, following a six point rise in CBS stock on Monday, as speculation increased that someone might bid for CBS. RCA Corp., the parent of the NBC Network, was up 1 5/8 to 42 for similar reasons. ABC, which rose 31 3/8 points a share on Monday, was up 1 3/8 today, to 107 1/4.
Murphy and Goldenson also met with members of Congress, according to a spokesman for ABC, including Rep. Timothy E. Wirth (D-Colo.), chairman of the House subcommittee on telecommunications, consumer protection and finance; Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, and Sen. John C. Danforth (R-Mo.), chairman of the Senate Commerce Committee.
The two were well received by the congressmen, Hill sources said. "There appears to be no major public policy obstacle to this takeover," Wirth said.
Under federal rules limiting the multiple ownership of radio and TV stations, Capital Cities and ABC will have to divest hundreds of millions of dollars worth of radio, television, cable television and possibly newspaper properties if the acquisition plan goes through.
Regulatory conflicts center on restrictions on the audience a single company can reach through its TV stations and prohibitions of cross-ownership of different media in the same market.
In previous broadcast license transfers, the FCC has required companies to divest TV stations in locations where a second station was purchased, despite requests on the part of companies such as Gulf Broadcasting Co. and Scripps-Howard Broadcasting Co. for permission to own both VHF and UHF stations in the same market.
On April 2, new rules go into effect allowing companies to own 12 TV and 12 AM and FM radio stations. TV stations will not be permitted to reach more than 25 percent of the national audience. Currently, companies have no restrictions on audience reach but can own only seven TV, AM and FM radio stations.
"Nobody has sat down and laid out a master plan" as to what might be divested, said one executive close to the two companies who asked not to be identified.
But the two companies will have to reduce their combined audience reach from 28 percent to 25 percent, sources close to the companies said. As of late yesterday afternoon, the companies had not indicated when they would file an application with proposals for divesting certain assets, FCC officials said.