The debate over what role the Federal Communications Commission should play in regulating hostile takeover bids for media companies heated up yesterday when the FCC agreed to review a staff decision not to intervene in a proxy fight for control of Storer Communications Inc., a Miami-based broadcasting and cable television company.
The Storer proxy fight and the FCC's decision to reconsider its role in that contest by April 12 will offer a partial answer to the question of whether media companies that are the targets of hostile takeover bids are going to be treated radically differently than takeover targets in other industries.
Recently, former FCC commissioner Charles Ferris went to the agency on behalf of his client, Atlanta broadcaster Ted Turner, to try to learn whether it would block a hostile takeover bid for one of the major television networks. The visit started rumors that Turner was going to bid for CBS Inc.
Some FCC commissioners, echoing the free-market philosophy of the Reagan administration, indicated they would not stand in the way of a bidder, like Turner, who already was an approved broadcaster, solely because he was making a hostile bid. That led to charges by some media executives, including those at CBS, that the FCC is siding with the raiders, rather than maintaining a neutral stance.
Speculation about takeovers in the media industry has increased since Capital Cities Communications Inc. announced on March 18 that it had agreed to acquire American Broadcasting Companies Inc. for more than $3.5 billion in a friendly deal.
The debate over how the FCC would treat hostile bids in the broadcasting industry turned from the theoretical to the practical when a group of investors, calling themselves The Committtee for Full Value of Storer Communications Inc., said on March 19 that they wanted to gain control of Storer by soliciting enough votes to elect its own slate of directors which would liquidate the Miami-based company. The investors, who own slightly more than 5 percent of Storer's stock, are arguing that stockholders will benefit if the company is broken up and sold in pieces because the value of the company's assets exceeds its stock market price.
The group has launched a proxy fight for control of the company, which has its annual meeting May 7. An investment banking source said he believes the group has a "very good chance of winning" the proxy fight unless the FCC intervenes.
On March 26, Storer asked the FCC to dismiss the dissident group's application seeking control of the company, but three days later the FCC turned down Storer's request. The FCC said it would not get involved in the proxy fight because it agreed with the dissident group's contention that control of Storer rests with the shareholders. Therefore, the FCC would play no role in the fight, since a change in the membership of the board of directors would not constitute a transfer of control of the company's TV stations.
Storer appealed the staff decision, saying it wanted the FCC to examine whether the proposed change of directors was in the public interest, since Storer owns seven television stations.
Under pressure from several influential congressmen and others, the FCC agreed to review its decision not to intervene in the proxy fight.
The debate also extends to the question of when the FCC ought to get involved in rendering decisions about the parties. Storer officials and others in the media industry said they think the FCC gave the dissident shareholder group unfair support at a critical time in the group's proxy fight by saying it would not intervene in the battle.
Storer and others in the industry who oppose hostile bids hope the FCC will decide next Friday, when it reviews the decision, to withhold a final ruling on its involvement until after Storer's annual meeting next month. They believe this would prevent the FCC from giving the dissident group unfair government support.