Atlanta media executive Ted Turner yesterday dropped his hostile bid to acquire CBS Inc.
Turner abandoned his quest for CBS as part of an agreement to get the Wall Street firm of Drexel Burnham Lambert Inc. to help him finance the friendly $1.5 billion cash acquisition of MGM/UA Entertainment Co., sources said. Drexel, the leader in the financing of acquisitions using high-yield securities known as junk bonds, already is involved on the other side of this deal as the financial adviser to MGM/UA.
Turner said yesterday that Drexel has promised "to use its best efforts to secure the financing on a timely basis." Drexel's presence should help to reassure skeptics on Wall Street who have questioned Turner's ability to raise the cash needed to acquire MGM/UA. Turner's $29-a-share offer is believed to be a high price.
Sources said Turner also dropped his bid for CBS because he was excited about the opportunity "to acquire one of the world's major motion picture studios in a friendly deal that had a much higher probability of succeeding." Sources said the complexity and size of this deal would preclude Turner from launching a new effort to gain control of CBS in the near future.
Turner and MGM/UA announced yesterday that they have entered into a definitive merger agreement that has been approved by the directors of both companies. The merger is subject to the approval of MGM/UA stockholders and government and third-party approvals.
To discourage outside bidders from entering the contest, MGM/UA has granted Turner a conditional option to purchase 9.2 million shares of the company's stock at $29 a share. Kirk Kerkorian, MGM/UA's largest stockholder with 50.1 percent of the company, has granted Turner a similar option to purchase all of his stock for $29 a share. The options are exercisable in the event the MGM/UA board of directors approves any other merger or if a third party acquires more than 10 percent of the company's outstanding shares.
As part of the deal announced yesterday, Turner has agreed to sell United Artists to Kerkorian for about $470 million. Kerkorian will then give those former MGM/UA shareholders who are interested the chance to buy stock in the company that will include the 2,400-film UA library and 50 percent interest in a company that distributes new releases.
Turner is hoping that he will be able to hold down the cost of obtaining programming for his WTBS-Superstation -- the cable channel that broadcasts a variety of movies and sports to cable subscribers -- by acquiring MGM's 2,200-film library. In addition, by acquiring the MGM studio, Turner would fulfill his goal of expanding Turner Broadcasting System's stake in the production and distribution of movies and television programs. Turner Broadcasting owns Cable News Network, the Atlanta Braves baseball team and the Atlanta Hawks basketball team.
In a related development, the conservative Fairness in Media group said yesterday that because Turner was withdrawing his bid for CBS, the group would "urge conservatives to purchase stock in CBS" as part of a renewed effort to try to gain control of the company. FIM has said it believes CBS has a "liberal bias" in its news coverage.