Atlanta broadcaster Ted Turner responded to questions raised by the Securities and Exchange Commission by filing a statement with the agency yesterday that prominently explains the risk to investors in his bid to acquire control of CBS Inc.
Turner's filing with the SEC did not contain any material changes in the terms of his hostile takeover bid. There had been some speculation that Turner was able to attract partners to add cash to his proposal, but he apparently has been unsuccessful in that effort.
There is no cash in Turner's bid. Instead, he offers CBS stockholders a complex package -- including risky, unsecured securities called junk bonds -- in exchange for their stock. He plans to help finance the proposed takeover by selling many of CBS's businesses. Turner is waiting for government approval before taking his proposal to CBS stockholders.
"We expect the registration statement describing Turner's offer will clear the SEC by next week at the earliest and mid-June at the latest," said William C. Bevins, vice president of finance of Turner Broadcasting System Inc. "Once the registration statement clears the SEC , we can mail it to the shareholders. The document filed yesterday amplifies a number of areas that the SEC pointed out needed more explanation or disclosure."
CBS has said repeatedly that it opposes Turner's takeover bid. Last week, CBS said it plans to consider financial transactions -- including a possible merger or the repurchase of some of its own shares -- that would increase the price of CBS stock in order to defeat Turner's bid.
Turner's filing with the SEC yesterday prominently explained that, because his takeover bid for CBS is heavily dependent on borrowing, there are risks of nonpayment of interest that could end up by hurting investors.
"In the event that TBS Turner Broadcasting fails to make any interest or principal payment . . . TBS would be in default. . . . As a result, the market value of TBS securities would decline significantly," the filing says. "In the event that such a failure occurred prior to consummation of the merger, it would be expected that the market value of the CBS shares would also decline significantly. . . . Failure to make required payments . . . would adversely affect . . . TBS and might render it insolvent."
The filing, which includes new financial projections, also says that, although TBS believes the junk bonds and other securities it plans to offer in exchange for CBS stock will be traded and marketable, there is "no assurance that established trading markets for any or all of the TBS securities will develop or be maintained." The filing also says TBS cannot predict the market prices for these securities.
Another risk prominently discussed is that Turner may encounter long delays in completing the proposed takeover because of lengthy proceedings that could postpone final Federal Communications Commission approval.
CBS stock has been rising this week, amid market rumors that the company was going to announce a merger. CBS officials said yesterday that no major announcement is planned. The stock, which opened for trading on Tuesday at 109 3/4, closed yesterday at 115 7/8, up 3/4 on 274,400 shares.
Earlier this week, Turner, who has been in Moscow, announced that he has signed an important two-year agreement to exchange and produce programming with Gosteleradio, the U.S.S.R. State Committee for Television and Radio. Turner said the wide-ranging exchange of news, sports and entertainment programming will include joint production of a six-hour documentary about the Soviet Union.