The board of directors of CBS Inc. rejected broadcaster Ted Turner's $3 billion bid for the company yesterday, saying his offer lacks value and would weaken CBS financially by burdening the company with excessive debt.
CBS said Turner's bid asks the company's stockholders to surrender control in exchange for "highly speculative securities." CBS also filed suit against Turner yesterday as part of its aggressive campaign to resist his takeover attempt.
CBS also attacked Turner personally yesterday, saying that because of "a number of pejorative statements by Mr. Turner about various minority, religious and ethnic groups, we believe that Turner's acquisition of CBS would undermine the CBS network's present broad acceptance by the American public."
Turner launched his bid for control of CBS Thursday. His bid, which includes no cash, offers CBS stockholders a complex package -- including high-yielding, risky securities known as "junk bonds" -- in exchange for their stock and includes a plan to help finance the proposed takeover by selling all of CBS's non-broadcasting businesses.
Meanwhile, Wall Street arbitrageur Ivan F. Boesky disclosed in a filing with the Securities and Exchange Commission yesterday that he has sold about half of his CBS stock. Boesky, who recently purchased 8.7 percent of CBS at an average price of $95.50 a share, told the SEC that as of the close of business Friday, he owned 4.3 percent of the company.
Boesky sold the CBS shares at prices ranging from $107.65 to $110.12 a share, and there were market rumors yesterday that he was continuing to sell his CBS stock. Boesky sold most of his shares Thursday and Friday, after Turner revealed his buyout plan.
"We think Turner's offer is an outrage to CBS stocholders," said CBS Vice President William Lilley III. "The chances are extremely slight to nonexistent that a person who acquired this batch of Turner-offered securities would receive any of the income promised under them."
CBS filed suit in the U.S. District Court for the Southern District of New York, charging Turner with violations of federal securities laws through statements he made prior to the formal announcement of his takeover bid. The suit alleged that Turner tipped off arbitrageurs and Fairness in Media, the conservative group supported by Sen. Jesse Helms (R-N.C.), prior to public disclosure of his bid.
CBS also said in the suit that Turner's registration statement with the SEC contains numerous misstatements and omissions, and that Turner's attempt to take over CBS violates federal antitrust laws.
CBS has been the target of takeover speculation since Fairness in Media announced in January that it wanted to obtain control of CBS to end what it calls a "liberal bias" in CBS network news coverage. Turner held discussions with Sen. Helms and FIM about making a joint bid for CBS prior to launching his own takeover effort. FIM, which has been encouraging conservatives to purchase CBS shares as part of its effort to influence the company, has said it will do whatever it can to help Turner gain control of CBS.
While Wall Street analysts and investment bankers continue to argue about the true value of Turner's complex bid, with estimates ranging from $120 to $160 a share, the Federal Communications Commission and the SEC also are reviewing the proposal. Turner needs government approval before he can proceed with his offer to CBS shareholders.
CBS Chairman Thomas H. Wyman recently told The Washington Post that he does not believe Turner has the "conscience" to run a major television network. CBS continued its attack on Turner yesterday, saying that if Turner Broadcasting gains control of the company, it would "jeopardize important relationships with affiliated stations, the creative community, advertisers and our employes."
CBS said in a filing with the SEC yesterday that it is not currently in negotiations that would lead to a merger or other financial recapitalization of the company as a result of Turner's bid. While most Wall Street analysts do not expect Turner to succeed in gaining control of CBS, there has been widespread speculation that his offer may force the company to find some way to enhance the value of CBS stock, through a merger with a friendly partner such as the General Electric Co. or by some form of stock buyback.
Morgan Stanley & Co., CBS's investment banker, said in a strongly worded letter to CBS directors yesterday that Turner's proposal is, in reality, an attempt to buy CBS using its own assets as collateral, while transferring voting control of the company to himself.