Atlanta broadcaster Ted Turner told the Federal Communications Commission yesterday that, if his takeover bid succeeds, he would be able to sell enough CBS Inc. assets to raise the cash needed to operate the network for the next decade.
Turner urged the FCC to rapidly grant him approval to proceed with his takeover bid in a lengthy filing made public yesterday. While CBS told the FCC on June 3 that Turner's highly leveraged bid would bankrupt the company and destroy the CBS television network financially, Turner said in his filing that he could maintain a positive cash balance through 1994.
Inherent in Turner's projections is the assumption that he will be able to raise about $2.5 billion within two years by selling certain CBS assets, such as the company's Philadelphia television affiliate and its entire publishing division, to help finance his takeover bid. Turner also unveiled a plan to reduce future interest expenses by repurchasing $1.39 billion of debt before it matures. A source close to Turner said the CBS financial projections do not accurately reflect the impact that asset sales would have on the company's future financial viability.
CBS will respond on June 28 to Turner's latest filing, and then the FCC will decide whether it has enough information to act on Turner's application. CBS wants the FCC to conduct lengthy hearings that could delay Turner's bid for months, while Turner hopes the FCC will grant him permission to proceed by this fall.
Turner has said he does not intend to begin purchasing CBS stock until after his bid has been approved by the FCC. The commission must rule because Turner's bid involves a "change of control" of CBS radio and television broadcast licenses. Turner already holds an FCC broadcast license for his Atlanta-based WTBS Superstation.
There is no cash in Turner's bid for CBS. Instead, he offers CBS stockholders a complex package -- including unsecured securities called junk bonds -- in exchange for their stock. He plans to finance the proposed takeover by selling many of CBS' businesses. Sources close to Turner said the Securities and Exchange Commission is expected to give Turner permission to proceed with his bid today. He also needs approval of the antitrust division of the Justice Department, which is reviewing the bid to assess its impact on competition.
Several knowledgeable investment bankers have told The Washington Post that they believe CBS will be forced to take major steps, such as repurchasing some of its own shares, to increase its stock price in order to defeat Turner's bid. 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.
CBS stock closed yesterday at 118 1/2, up 1 1/2, on 314,500 shares traded, while Wall Street analysts estimate Turner's bid is worth about $150 a share.
"The filing is another Turner rerun, all junk securities and no cash," CBS Senior Vice President William Lilley III said yesterday. "Turner says the proposal is viable, and CBS says it is not. There is a massive disagreement on material facts. The FCC should begin an evidentiary [lengthy, detailed] hearing tomorrow to put the experts under oath and see who is correct."
CBS said yesterday that 248 groups and individuals have written to the FCC to oppose the Turner bid.
In opposing the takeover bid at the FCC, CBS argued 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, because Turner already owns Cable News Network and WTBS, both of which are broadcast to more than 30 million homes.
Turner disputed those claims in his FCC filing. "By divesting CBS' 18 radio stations and Philadelphia television station . . . the transfer will lead to a combined expansion of information diversity for one-fourth of all television households in the entire country," the filing said. " . . . These divestitures, coupled with TBS' plan to sell CBS' agglomeration of consumer and specialty magazines, book publishing subsidiary and record business, will dramatically increase the number of independent and antagonistic sources of information.
"The allegations by CBS and its supporters that the common ownership of CNN and CBS News will jeopardize diversity in national video news are inconsistent with commission findings -- strongly supported in the past by CBS -- that the national information marketplace is broadly defined and intensely competitive."
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 has urged the commission to adopt special procedures to review the proposed change of control. Turner said "the fact that a control of a broadcast network is involved . . . does not impose a more severe standard on the FCC's review of these applications. . . . The call for special procedures is made primarily for purposes of delaying."
Even though CBS has attacked the long-run financial viability of the takeover bid and Turner has responded with detailed financial projections through 1994, the FCC is only required to certify that a bidder has sufficient financial resources to operate for 90 days