Atlanta br oadcast executive Ted Turner's controversial non-cash takeover bid for CBS Inc. is dead.
Turner's original hostile takeover attempt died in federal court here today when Judge Robert L. Vining Jr. turned down his request for an injunction to block the $954.8 million CBS stock buyback plan -- but Turner indicated that he will try other, longer-range tactics to acquire the network.
The CBS stock buyback plan includes provisions, such as a restriction on the amount of debt the company can have on its books, which Turner has said make it impossible for him to successfully complete his non-cash takeover bid for the company.
Turner, who never entered the Northern District of Georgia federal courtroom during the four days of proceedings, made it clear at the annual meeting of Turner Broadcasting System Inc. at the nearby Omni here this morning that he intends, nonetheless, to carry on his fight to gain control of CBS.
He said that if he could not block the CBS stock buyback, he would attempt to restructure his takeover bid by soliciting partners who could add cash to his proposal. Turner unsuccessfully attempted to raise cash to sweeten his bid earlier this month, and he said today that if he is unsuccessful again, he will try to win control of CBS by launching a proxy fight next year.
"We do intend to pursue CBS as long as there is any reasonable chance of success," Turner said. "If we're not successful in the courts in blocking their stock buyback plan , we will attempt to revise our offer. It will require a substantial commitment of cash or the equivalent of cash. We will be seeking partners to help us in that regard, and in the event that that is unsuccessful, we intend to carry it further in the form of a proxy fight at the CBS annual meeting next spring."
In a proxy fight, Turner would try to gain control of the CBS board of directors by soliciting votes for his own slate of directors. While it would be very difficult to obtain majority support for his own slate, this technique would not require Turner to raise the billions in cash he now needs to acquire control of CBS by purchasing shares.
The only aspect of the CBS stock buyback plan challenged by Judge Vining is a special agreement the company made with its founder and director, William S. Paley. While CBS is offering other stockholders $40 a share in cash and $110 a share in notes for 21 percent of their stock in an offer that expires on Wednesday at midnight, the company is offering Paley $150 a share in cash for his stock, although he must wait at least three years to receive it.
CBS argued during the trial that the agreement with Paley was designed to help him overcome special adverse tax consequences that would arise if he tendered his shares under the offer made to other stockholders. CBS also argued that the plan saved the company money, since it does not have to pay Paley for his shares until 1988.
But Judge Vining said that, while he will not block completion of the rest of the CBS stock buyback plan, he is considering blocking the special agreement with Paley.
"I had great problems with this and believe it is contrary to the best interest of stockholders," Vining said. "I can envision any number of shareholders of CBS will have some problem, depending on their personal financial situation . . . I'm going to reserve a ruling on this and give counsel the chance to give me more information. I do not believe the problem is sufficient to enjoin CBS from going forward with the rest of its purchase offer."
Following the ruling, CBS Inc. Chairman Thomas H. Wyman, who attended all four days of proceedings and was the last witness to appear in the case, said that he not only was pleased that the company will now be able to proceed with its stock buyback plan, but also was happy that Vining's ruling included favorable comments endorsing the conduct of the CBS board of directors during the takeover fight. In his opinion, Vining said the CBS directors carefully considered their actions and operated well within a legal concept known as the business judgment rule, which bars judicial interference in the decisions of directors who make judgments prudently and in good faith.
In reaching his decision, Vining said he believed a stock buyback plan was something the company had been considering for many months and was not simply a response to Turner's takeover bid. Vining said Turner's takeover bid merely forced CBS to move ahead with the plan, which was carefully considered by the directors before it was adopted.
Turner lawyers said they plan to appeal today's decision promptly in the U.S. 11th Circuit Court of Appeals, but several legal experts said privately they believe the appeal has no chance of succeeding.
Meanwhile in Washington, CBS filed an emergency petition with the Federal Communications Commission, asking the commission to postpone hearings on Turner's takeover bid scheduled for Thursday and Friday. CBS said that since Turner has said his current bid would be withdrawn if he lost the trial in Atlanta, the FCC no longer has a viable offer to consider at the hearings.
Turner lawyer Charles Ferris said he will urge the FCC in a filing on Wednesday morning to hold the hearings as planned. He said that that since the same criteria will apply both to Turner's initial takeover proposal and any future bids, the commission should hold the hearings and continue to expeditiously review Turner's bid.
Turner needs FCC approval to proceed because the commission must approve the transfer of control of broadcast licenses held by CBS. Earlier in the day, as expected, the FCC turned down Turner's request to block the CBS stock buyback plan on the grounds that it unlawfully transfers control from the shareholders to management. Turner unsuccessfully made the same argument in federal court.