Denver oilman Marvin Davis said yesterday that he is not going to be Rupert Murdoch's partner in the $2 billion acquisition of six television stations from Metromedia Inc.
A spokesman for Murdoch immediately confirmed that Murdoch has sufficient funds to buy the stations on his own.
Davis said he decided not to exercise an option to purchase 50 percent of a newly formed company that will own the stations. Sources said Davis was not comfortable with the financial structure of the deal. Several Wall Street analysts have said that, relative to other recent media deals, the price in the Metromedia transaction is high.
A spokesman for Murdoch said the Australian publisher would not have any difficulty arranging the financing for the deal. Murdoch needs about $250 million in cash to complete the $2 billion deal. The remainder consists of about $1.3 billion in Metromedia debt that he has agreed to assume, and $450 million that he will receive from the sale of Metromedia's Boston television stations to Hearst Corp.
"We have decided not to exercise our option" to purchase 50 percent of the company that will acquire the Metromedia stations, Davis said. "Instead, we will concentrate on the development of our other investments -- including Twentieth Century-Fox. I look forward to continued association in partnership with Mr. Murdoch at Fox."
Davis and Murdoch became partners earlier this year when Murdoch bought half of Twentieth Century-Fox Film Corp. from Davis, who still owns the other 50 percent. The Metromedia stations will be used as outlets for Fox productions, hopefully creating a cost-effective broadcasting network at a time when many independent television stations are searching for ways to hold down the spiraling cost of obtaining programming.
The Metromedia stations that Murdoch has agreed to acquire, if he receives government approval, include WTTG-TV (Channel 5) in Washington, and stations in New York, Los Angeles, Chicago, Dallas and Houston. They will give Murdoch access to about 21 percent of the nation's television audience in his quest to build a global broadcating and publishing empire.
While Murdoch will be forced to divest some of his media properties in the United Statese and possibly in Australia to comply with various restrictions on ownership, his vast remaining holding will include well-known newspapers, maagazines and television stations in Australia, Europe and the United States.
Earlier this week, Murdoch announced that he has agreed to sell The Village Voice newspaper to businessman Leonard Stern for $55 million. Murdoch, who also owns The Chicago Sun-Times and The New York Post, is going to ask the Federal Communications Commission on Monday to give him a two-year waiver of federal rules that would require him to sell the newspapers because he is acquiring television stations in New York and Chicago. Murdoch also will be asking the FCC on Monday to approve his request to take control of the broadcast licenses that go along with the Metromedia stations.
Murdoch filed an application to become an American citizen with the Immigration and Naturalization Service last month. He needs to become a citizen in order to comply with a rule that prohibits noncitizens from acquiring control of U.S. television licenses.
Murdoch's other publishing holdings in this country include The Boston Herald, The San Antonio Express and New York magazine. In Europe, he owns Sky Channel, Europe's first commmercial cable television network, which already is carrying programming, including "Dallas," to millions of viewers throughout the continent. In Britain, Murdoch publications include The Sun, the largest circulation daily in the country, and The Times of London. In Australia, Murdoch owns The Australian, a national newspaper, in addition to The Daily and Sunday Telegraph, The Daily Sun, and other newspapers, magazines and two television stations.
The FCC, which is the major regulatory hurdle to Murdoch's acquisition of the Metromedia stations, has indicated that, so long as he follows the agency's rules, it will approve the $2 billion deal.
Once Murdoch files a petition with the FCC on Monday, there will be a public comment period.