CBS Inc., joined by many of its 208 affiliated television stations, urged the Federal Communications Commission yesterday to block Atlanta broadcaster Ted Turner in his hostile takeover bid, which they said would destroy the network financially.
CBS Affiliates Chairman Joe Carriere said that more than half of the affiliated stations filed petitions at the FCC opposing Turner's bid. Many of the petitions, he said, were put in the mail yesterday, the deadline set by the FCC for filing objections to the takeover plan.
"I'm told that well over 100 affiliates will be filing" to block Turner at the FCC, Carriere said in an interview yesterday. "That is more than 50 percent, and to my knowledge, this is the largest affiliate response ever."
Other groups, including Action for Children's Television and United Church of Christ, also asked the FCC yesterday to block Turner's bid. Those groups said the FCC should prevent the merger of Turner Broadcasting System Inc. and CBS because it would reduce diversity in news programming. They argued that Turner's Cable News Network is the only "rising competitor" to the three major television networks.
CBS also urged the FCC, which would have to approve a switch in ownership of the company-owned radio and television stations, to examine closely the possible transfer of control of its entire television network as well, even though the agency has no formal obligation to consider that issue.
Turner will have about 10 days to respond to the petitions filed at the FCC yesterday; CBS will have five days to answer him. The FCC then will make a decision based on its review of the case, a process that could take months.
Until CBS stockholders are assured that the FCC will not prevent Turner from obtaining control of the company, it is unlikely that they will offer to sell him their shares.
Last week, Turner responded to questions raised by the Securities and Exchange Commission by filing a statement with the agency that prominently explains the risk to investors in his bid to acquire CBS. There is no cash in Turner's proposal. 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 SEC approval, which is expected by mid-June, before officially taking his proposal to CBS stockholders.
CBS said in its FCC filing that if Turner acquired control of the network, it would substantially lessen competition in the production and distribution of news and in the sale of national television advertising. CBS also said the proposed merger would reduce diversity and competition in the Atlanta market; there is a CBS affiliate in the market and Turner already broadcasts there through his WTBS Superstation.
CBS Senior Vice President William Lilley III said yesterday that the interest expense from Turner's highly leveraged proposal -- which CBS said in its filing would increase almost tenfold to $742.5 million annually -- would "bankrupt CBS and send it into a death spiral."
"The basic argument is the lack of finances Turner would bring to the situation," said Carriere, who owns CBS affiliate KBIM-TV in Roswell, N.M. "With that lack of finances would come a decline in the amount and quality of public interest programming. He Turner is already competing in the news area Cable News Network . I wonder if we really need to lose that fourth service, since it is the only major television news source besides the networks."
Some Wall Street investment bankers have told The Washington Post that they believe Turner's bid is financially viable and will force CBS to take significant financial steps, such as a stock buyback at a premium to the market price. CBS has said it is considering such financial steps, which could defeat Turner's current proposal by diminishing the difference between the price of CBS stock and the value of Turner's bid, which Wall Street estimates is about $150 a share.
While the FCC technically has jurisdiction over individual station broadcast licenses and does not have to rule on the transfer of control of a television network, CBS urged the commission to adopt special procedures to review the proposed change of control. CBS cited several prior cases, all involving ABC, in which the FCC considered the question of a transfer of control of a major network.
"As the commission has long recognized, network transfers often involve issues that far exceed in importance those implicated in routine station tranfers. . . . The networks are vitally important to the overall performance of the nation's system of broadcasting," CBS said in its petition.
"It is obvious that substantial and material issues exist concerning TBS's financial qualifications to take control of CBS and the network. The public interest requires that these issues be carefully scrutinized by the FCC," CBS said.
CBS did not discuss any material facts reflecting on Turner personally, even though CBS Chairman Thomas H. Wyman has said that Turner lacks the "conscience" to operate a major television network. The CBS filing was confined to the general impact that a Turner takeover would have on the network and the industry.
Turner already holds an FCC broadcast license for his Atlanta-based WTBS Superstation.