Capital Cities Communications Chairman Thomas S. Murphy said yesterday that he would sell the company's Buffalo and New Haven television stations and some or all of the company's cable television operations to satisfy Federal Communications Commission regulations governing the acquisition of American Broadcasting Cos.
"We will have to sell the New Haven station and we are going to sell the Buffalo station too," said Murphy in a telephone interview from his New York office.
The move to sell Capital Cities' Buffalo station comes as no surprise since Warren Buffett, an investor who will hold 20 percent of Capital Cities, owns the Buffalo Evening News newspaper. Under FCC restrictions on cross-ownership of different media, one or the other would have to be disposed of because of the increase in Buffett's share.
Capital Cities New Haven station overlaps with WABC-TV in New York and thus one or the other would have had to to be sold to complete the merger of the two media giants. WPVI, Capital Cities' Philadelphia station, also has a signal that overlaps with an ABC station, but Murphy declined to say if the Philadelphia station might be sold to satisfy FCC requirements.
To complete the merger, some stations might have to be sold simply to reduce the percentage of national audience Capital Cities reaches under new FCC rules that go into effect April 2. Right now, the combined audience reach of the two companies is 28 percent and must be reduced to 25 percent.
Because of cable TV and television network cross-ownership restrictions, Murphy said of his cable assets "we would have to dispose of some of that, too." Capital Cities owns 50 cable stations in 16 cities reaching 365,000 subscribers.
Murphy said numerous companies had already expressed interest in the TV stations and in purchasing "the entire package" of cable television stations. Capital Cities would have no trouble selling any of the assets, he said.
"A substantial number of letters I've received have first congratulated me on the acquisition of ABC and then expressed interest in buying some assets -- I won't lack for buyers," he said. Murphy declined to identify potential buyers.
Wall Street analysts yesterday valued Capital Cities' Buffalo station at $250 million; its New Haven station at $100 million, and its Philadephia station at half a billion dollars. The cable assets, as a package, would sell for about $325 million, analysts said.
Because of radio and TV cross-ownership rules, radio assets might be disposed of as well, analysts said yesterday. "They would sell radio stations in those areas where there was radio and TV cross-ownership," said one analyst who asked not to be named.
According to Alan Gottesman, an analyst with L. F. Rothschild, "$200 million worth of radio has to be sold." Because ABC owns an AM and FM radio station in New York, as well as a TV station, and because the Capital Cities Philadelphia station overlaps with ABC's New York TV signal, one possible scenario would be to sell ABC's New York radio stations and Capital Cities' Philadelphia TV station, said FCC officials.
Murphy could not say exactly when an application might be filed with the FCC for permission to transfer broadcast licenses but said he hoped the application would be filed by mid-June at the latest -- around the time stockholders vote on the merger. Lawyers for both companies are meeting today to discuss the application, he said.
FCC officials said the four possibilities Capital Cities and ABC have are to spin off any assets that conflict with the rules before filing; ask for a temporary waiver to permit up to one and a half years more to spin off conflicting assets; ask for a complete waiver and prove to the FCC why the public interest would be best served through the retaining of assets, or any combination of the above.
"I'm not so sure filing for waivers will be done," said Murphy. "We plan to do whatever is appropriate to meet the FCC requirements." There is a chance the companies would ask the FCC for an extension to dispose of the conflicts involving assets, he said.
Murphy said no drastic cost-cutting measures or personnel changes would be forthcoming at his new acquisition. Nor would Murphy change the content of TV programming, he claimed. "Networks are public trusts and I would like to think they could be handled the same way as in the past -- with great fairness in the news -- and I hope we have that kind of reputation," he said.