The Securities and Exchange Commission is expected to rule this week on the bid by Ted Turner to take over CBS Inc., setting in motion a regulatory timetable that could stretch to near the end of the year before the Atlanta broadcaster can actually try to buy CBS stock.
In April, Turner announced plans to offer CBS shareholders a package of securities, including high-yielding "junk bonds," in exchange for their stock. Wall Street analysts estimate that this offer, which includes no cash, is worth between $150 and $160 a share. Turner has said he would help finance the takeover, which would give him voting control of the company, by selling all of CBS' nontelevision operations, including the company's radio, recording and publishing businesses. CBS has rejected Turner's offer, saying it is too risky and would bankrupt the company.
Once he receives SEC approval, Turner will notify CBS stockholders of his offer, but he does not plan to try and purchase any shares until after he receives Federal Communications Commission approval.
It is not clear how long it will take for Turner to receive FCC approval, but knowledgeable Washington sources say they do not believe it will take more than five months. CBS and many special interest groups recently filed petitions with the FCC opposing Turner's bid. Turner will answer those petitions in his own FCC filing this Tuesday. CBS will then have five business days to respond.
Depending on which side you ask, FCC approval for Turner could come as early as this fall, or it could be withheld for an indefinite period. Most observers believe that since Turner is already an FCC-approved broadcaster who holds a television license for his WTBS Superstation, the commission will not hold the lengthy proceedings that could block Turner's bid for many months. In addition, FCC Chairman Mark Fowler has made it clear that he does not believe the FCC should be used by companies to block takeovers.
FCC sources have indicated they believe the commission will hold one day of hearings in August, featuring Turner and CBS Chairman Thomas H. Wyman, but no final decision has been made. CBS is concerned that the FCC will hold only one day of hearings and then give Turner approval to proceed. CBS sent a letter to FCC Chairman Fowler on June 7, urging him to conduct a lengthy investigation into Turner's bid and expressing concern that one day of hearings in August "might degenerate into little more than a media event."
Turner needs FCC approval because the agency must approve the transfer of CBS broadcast licenses for its television and radio stations. CBS also has urged the FCC to adopt unusual and lengthy proceedings because Turner would be acquiring control of the CBS television network.
Turner also needs the approval of the antitrust division of the Justice Department. CBS claims that because Turner owns Cable News Network, competition and diversity in television news would be diminished if he acquired CBS. Turner is in the process of supplying the Justice Department with additional information.
Most observers believe that the Justice Department will not block the proposal. If the Justice Department objects to certain parts of Turner's takeover bid, it probably will recommend that Turner sell specific operations, but it will not block the entire deal, legal experts say.
Turner is the chairman and majority stockholder of Turner Broadcasting System Inc., an Atlanta-based company that owns the Atlanta Braves baseball team, the Atlanta Hawks basketball team, and Cable News Network and the WTBS Superstation, which transmit to more than 30 million homes. TBS stock has traded on the over-the-counter market, but sources close to Turner said it will begin trading on the American Stock Exchange this week. They said the Amex has indicated that the securities Turner is offering in exchange for CBS stock also will be allowed to trade on that exchange.
If Turner receives the necessary government approval to proceed, he will still have to convince CBS stockholders to sell him their shares. Wall Street sources say that is not considered to be likely unless Turner's offer is sweetened to include some cash, since CBS has a vast array of techniques it can use to make his current bid seem unattractive.
Knowledgable investment bankers believe that in order to defeat Turner's bid, CBS will be forced to take major steps, such as repurchasing some of its own shares to increase its stock price. If CBS increased its stock price by repurchasing shares at a substantial premium above the market price, Turner's bid would no longer be as attractive to stockholders because there would be little difference between the value of his offer and the price of CBS stock.
Turner has followed the advice of his lawyers by not discussing the CBS bid publicly until he receives SEC approval. But it is possible that once SEC approval is granted, Turner will return to the public spotlight to explain why he should be allowed to gain control of the number one television network.
CBS has been the target of takeover speculation since January when a conservative group backed by Sen. Jesse Helms (R-N.C.) said it wanted to acquire control of CBS to end what it believes is a "liberal bias" in network news coverage. That group has said it supports Turner's bid to acquire control, while CBS Chairman Wyman has said Turner does not have the "conscience" to own a major television network.