The Federal Communications Commission plans to meet today to begin to determine how to regulate hostile takeover attempts involving media companies without being used "as a sword or shield."
The FCC, which will solicit public comment on the issue, announced this spring that it would develop guidelines to govern its behavior during takeover battles. The commission made the announcement after denying a request by Storer Communications Corp. to intervene in a proxy fight waged by dissident shareholders who wanted to liquidate the company.
FCC sources said yesterday that the flurry of takeover and proxy fight activity in the broadcast world had prompted the need for specific procedures the agency might follow.
The FCC also is expected today to "consider all of [Washington Redskins owner Jack Kent] Cooke's requests" in his hostile takeover bid for Multimedia Inc., a South Carolina communications company, said an FCC official who asked not to be identified.
Cooke has said he will ask the FCC for permission to proceed with a billion-dollar bid that has been rejected by Multimedia, which owns 43 newspapers, five television stations, 10 radio stations and operates more than 100 cable systems as well as syndicating "The Phil Donahue Show."
In filings with the Securities and Exchange Commission last week, Cooke proposed a "two-step" approach to the takeover of Multimedia, using former Minnesota senator Eugene McCarthy as a temporary trustee. McCarthy would hold tendered stock until Cooke received FCC approval and could complete the acquisition.
The advantage to the trustee approach is that it would eliminate temporarily the need for FCC approval of a "long" form change-of-control application that involves a lengthy 45-day public comment period, according to an FCC commissioner who asked not to be identified. Instead, Cooke could file a "short" form to expedite transfer of control, the commissioner said. Cooke's credentials nevertheless would be reviewed by the FCC.
Many takeover or merger proposals currently are pending FCC approval, including media executive Ted Turner's hostile bid for CBS Inc.; Cooke's proposed takeover of Multimedia Inc.; a regional Bell telephone company proposed acquisition of a paging company, and "friendly" takeovers such as the merger of Capital Cities Communications Inc. and American Broadcasting Cos. Inc.
Congress also is getting involved in helping the FCC to determine what its role in takeover battles should be. Tomorrow, the subcommittee on telecommunications, consumer protection and finance headed by Rep. Timothy E. Wirth (D-Colo.) will hold hearings that attempt to answer questions, including: "What procedure should be utilized by the FCC with respect to hostile takeovers?" and "Should mergers involving broadcast networks be held to a higher level of public interest scrutiny?"
FCC Chairman Mark S. Fowler and several industry representatives will try to help Congress answer these and other questions. Some members of Congress, eager to see the FCC intervene in Turner's bid for CBS, have indicated that they are unhappy with the FCC's deregulation of the broadcasting industry.
The agency's aim is to develop rules that "outline how to carry out our statutory mandate, develop policies that are neutral -- neither acting as a sword or shield, provide for expedited procedure and accomodate [existing] federal laws and policies," said one FCC commissioner who asked not to be identified.
The public will have a comment period lasting at least a month to address the issues of "corporate control -- who has control of the board of directors or shareholders, whether or how to deal with hostile takeover issues in a gradual-buy situation where you don't get de facto control all at once but over a longer period of time," said another agency official who asked not to be named.
The FCC also will solicit public comments on the "trustee" concept, whereby a bidder seeking control of another company could make a tender offer and appoint a trustee to hold the stock temporarily until the bidder receives FCC approval and enough stock to take control of the company, the FCC commissioner said.
The approach, already outlined by Cooke, was echoed by Turner Broadcasting System Inc. (TBS) in filings Friday with the FCC. TBS said if the agency has not acted on its application for the transfer of control of CBS by its next shareholder's meeting, TBS will appoint an unnamed trustee to which it could temporarily transfer acquired CBS stock. The statement presupposes Turner's bid will gain acceptance by CBS shareholders. TBS would then replace existing CBS directors with TBS nominees, TBS said in its filing.
Once comments have been made by the public, the FCC will begin drafting rules or a policy statement on how proxy fights and hostile and friendly mergers should be handled by the agency.
Meanwhile, FCC sources said the agency would not wait for guidelines to make decisions on the pending applications of parties such as TBS. "We are under statutory obligation not to put things on hold," one FCC official said. "There are two other rings in the circus: the actual applications filed by Cooke and Turner, and the third ring is up on the Hill."
Lawyers for Turner Broadcasting and CBS, reflecting the uncertainty over the commission's role in takeover fights, said yesterday they did not know when the FCC would rule on Turner's petitions filed Friday to speed approval of his bid and to block a CBS recapitalization plan. However, both sides said they hoped to get some indication of the FCC timetable within the next few days.