CBS Inc., faced with a hostile takeover bid from broadcaster Ted Turner, said yesterday it plans to consider financial transactions including a possible merger or the repurchase of its own stock.
The disclosure, made in filings with the Securities and Exchange Commission after the close of trading, was the first time that CBS raised the possibility of a merger and indicates that the company believes it may need to take major steps that increase its stock price in order to defeat Turner's bid.
"This is to provide us with flexibility should these steps become desirable," a CBS spokeswoman said. "In our previous SEC posture, we were not permitted to do what the CBS board of directors would like to give the company the flexibility to do, which is explore these options. The board also adopted a resolution to ensure confidentiality as to possible terms or parties involved in any transaction," the spokeswoman said.
CBS said the options it will explore also include the sale or purchase by the company of "assets or businesses," changes in the company's capital structure and the issuance of new securities. However, the company was careful to say that "there is no assurance that any such transaction will be proposed or consummated, and the company may decide not to undertake any action of this nature."
Any move by CBS that either significantly increases its debt or its stock price would likely defeat Turner's current bid. For example, if CBS increased its stock price by repurchasing shares at a substantial premium above the market price, Turner's bid no longer would be as attractive to stockholders because there would be little difference between the value of his offer and the price of CBS stock.
Late last month, Frederick H. Joseph, the new chief executive officer of Drexel Burnham Lambert Inc., told The Washington Post that there is "zero chance" that Turner will win his fight to gain control of CBS, but he said the Atlanta broadcaster's bid will force CBS to undergo a financial restructuring to increase the value of its stock.
"The fact is that Turner is not going to end up with CBS," Joseph said. "He will force CBS to do some sort of an asset reallocation or something which will benefit their shareholders. . . . They CBS have 50 defenses, one of which would be to sell out, another of which would be to sell some pieces and make cash available to shareholders. They could do a leveraged buyout or do a partial leveraged buyout," Joseph said.
Investment bankers at two leading Wall Street firms, both with significant experience advising corporations on broadcasting mergers, told The Washington Post in separate interviews last month that internal analyses at their firms showed that Turner's bid was credible and worth about $150 a share. They said his bid could succeed unless CBS takes steps to increase the price of its stock.
Turner's bid for CBS, which includes no cash, offers CBS stockholders a complex package, including risky, unsecured securities called junk bonds, in exchange for their stock, and includes a plan to help finance the proposed takeover by selling all of CBS' non-television broadcasting businesses. Turner is waiting for government approval before taking his proposal to CBS stockholders.
CBS sources said the company plans to file documents with the Federal Communications Commission soon to try to block Turner's takeover bid. Turner needs FCC approval, Securities and Exchange Commission approval and Justice Department approval, in addition to the support of two-thirds of CBS' stockholders, to acquire control of CBS.
CBS stock closed yesterday at 109 7/8, down 1 1/2.