On Turner Broadcasting System Chairman Ted Turner.
He [Turner] is not qualified because he doesn't have the conscience. When what you are broadcasting goes out to 70 million people, you better be thinking about something broader than the things I think occupy his thinking, and that includes money.
On speculative press reports, several weeks before Turner launched his hostile takeover bid, that said Turner was going to make an offer for CBS.
[There is] no financial substance behind reports that Ted Turner plans to take over a network, any network. Turner Broadcasting privately acknowledges that reports were exaggerated and inaccurate.
On the CBS stock buyback plan.
What are we doing? The offer is very simple, very straightforward. It consists of a $954.8 million repurchase of 21 percent of the [stock] of the company at a price of $150 per share. The per share consideration is to be paid $40 in cash and $110 in investment-grade 10 7/8-percent, 10-year notes.
On why CBS is doing the stock buyback.
We are doing it to provide our shareholders with an opportunity to receive a substantial premium over recent market prices for a significant portion of their shares, while at the same time retaining a substantial equity [stock] interest in the company.
On provisions in the plan that block Turner's non-cash takeover bid and any other highly leveraged offer that does not have the support of the CBS board of directors.
A careful reading of the offer to purchase will make it clear that we have taken steps . . . that will temper tendencies by anyone to restructure CBS in a fashion that would be financially imprudent or result in inappropriate levels of risk. Specifically, [we] limit the ratio of debt to adjusted book capitalization to .75 to 1. [We believe] these are appropriate limitations on additional debt and other transactions that would create inordinate leverage and risk for the company.
On why CBS needs to cut overhead expenses.
There is no place I could point to where the Swiss watch is functioning so perfectly that there is no room for adjustment. Our overhead is not small at the corporate level. I don't think you'd characterize CBS as a lean and hungry skeleton crew headquarters operation . . . .We are talking about adjusting how we live and what it costs us to live in a serious way.
On the attractiveness of the CBS stock buyback plan versus the Turner takeover bid.
It seems obvious that the highly leveraged Turner securities to be issued in his offer will not be investment grade, as current Turner securities are not investment grade. By now, many of you have begun to review our FCC filings, in which the painfully unsound financial implications of the Turner offer are contained.
It is evident that our financial health will remain quite solid following our offer. A careful reading of the offer to purchase will also make it clear that we have taken steps to assure the credit standing of the new securities to the benefit of all sharheolders.
On the bill passed by the New York state legislature that would make successful, hostile non-cash takeover bids for New York corporations almost impossible. [The governor is reviewing the bill to decide whether to sign it or veto it.]
We think it is an excellent bill. It is not, as some have suggested, a CBS bill. It was initiated by the New York State Business Council well before the prospects for the Turner offer were initiated.
On why he thinks the bill is constitutional, despite Turner's assertions to the contrary and the decision in some other states to throw out similar bills on constitutional grounds.
One of the things about New York state that is attractive as we see it is that a bill of this sort, before it gets to the floor of the legislature, has a serious professional judicial review. So we don't think it has arrived there casually without the specific question of constitutionality having been explored by some pretty thoughtful and very high-grade legal talent.
On steps CBS will take to reduce the $1.3 billion of debt the company will have on its books if its stock buyback plan is completed as planned.
First, it is our intention over the next 12 months to divest assets which will yield $300 million in post-tax cash proceeds.
We expect that the money will be used primarily for debt reduction. Second, we are committed to reducing our annual overhead expenses from current projections by $20 million per year by the end of 1987.
We are intensifying our productivity focus somewhat in order to accommodate the share repurchase as smoothly as possible.
On core CBS operations for the future.
CBS consists of three exceptional core businesses, broadcasting, recorded music and publishing.
These are not only exciting businesses today, but we believe they have excellent prospects for growth. They are businesses we understand.
We believe they have important synergies among them and that with this focus, we will enhance the long-term profitabilty and growth of this enterprise.
On the importance of CBS stockholders.
We consider an essential aspect of our stewardship to focus on steps that will maximize the asset values and shareholder returns provided by CBS. Success in this regard is no less important to us than competitive success in our business operations and, obviously, they're related.
We have every reason to believe that the CBS which emerges from this recapitalization will attract a sustained level of investor interest. Simply put, our role is to perform, and your role is to write the report card.
On which assets CBS will sell to raise the $300 million.
Suffice it to say it is a mixed list involving the potential for the sale of activites, the sale of facilities and sale-lease possibilties, none of which will affect our fundamental commitment to the three primary businesses we are in. This is not to say you could not have within those three businesses asset dispositions or cost reductions.
On why the numerical restriction on the level of CBS debt that is part of the CBS stock buyback plan is likely to defeat Turner's hostile, non-cash takeover bid.
It is not possible for the number restriction on debt ratio to be exceeded without the approval of the present board.
On why CBS was forced to adopt a billion-dollar stock buyback plan.
If you asked me what has happened over the last six months that has brought us to this plan , the principal event in our industry was the proposed and obviously in-process merger between ABC and Cap Cities. That is what has moved valuations, followed by Metromedia in the process of being acquired by Australian publisher Rupert Murdoch and others. That is what created, and properly, the shareholder appetite to which we are responding.
On why CBS earnings so far this year have not met Wall Street expectations.
The television marketplace is not as vibrant at this moment in time, clearly, as it was at this time a year ago. The record marketplace is not as strong as it was in the second half of last year.
Not incidentally, expenses [are up]. I used to think the law department was a modest allocation. It now occupies 11 floors in Black Rock [CBS headquarters]. No, that's not true. But legal expenses over the first six months of this past year have been very substantial, and the time and events of the next little while and beyond will ascertain whether they continue for a time to be at high rates.
Those are the three principal ingredients of variations versus expectations.
On why Wall Street analysts should believe optimistic CBS profit projections for the future.
They the projections have survived a process of efforts to reduce them, to be as conservative as the law department would have us be. If I were in your shoes, I would believe the numbers if you knew everything we know. That must be very reassuring to you . . . .Follow our progress with interest. That is how we think it is going to be.
On whether the CBS stock buyback plan breaks new ground.
If groundless means without new ground, there is no new ground as we perceive it.
On the contrast between the CBS plan and the Turner plan.
Clearly, the world is dramatically confronted with very different possibilities and suggestions as to what are appropriate and manageable debt levels, even for this particular company. We have come from a history where 20 percent debt ratio , 16 or 18, we thought that virtuous and noble.
We now find ourselves in a completely different environment. To move [past 70 percent] strikes us and strikes the rating agencies as [leading to] different higher cost of funds and a very different kind of flexibility.
On whether Turner's current bid could be successful, if CBS completes its stock buyback.
One cannot forecast either the intentions of Mr. Turner and his associates or the response in the marketplace to this offer. But it is very clear that although our primary motivation, in terms of [restricting the level of] debt was to ensure the quality of [our securities], it would be difficult to imagine the present Turner offer being implementable if our stock buyback is completed.