Rosslyn-based Gannett Co. Inc., Hearst Corp. and New York Times Co. are among the major media companies that have been provided with confidential financial information concerning The Evening News Association, the Detroit-based media company that owns Washington's WDVM-TV, Channel 9, sources said yesterday.
The Evening News, which publishes The Detroit News and owns other newspapers and television stations, recently became the target of a $453 million hostile takeover bid by producers Norman Lear and Jerry Perenchio. Sources said the company instructed its investment adviser, Salomon Bros., to provide financial data about Evening News to media companies that are run by "nice people."
Sources said other potential bidders who have been involved in secret discussions recently concerning their interest in acquiring all or part of Evening News include Washington Redskins owner Jack Kent Cooke and Riggs National Corp. Chairman Joe Allbritton. They said Cooke appeared to be more interested than Allbritton and might try to acquire a minority stake in the company as he did recently during the battle for control of South Carolina-based Multimedia Inc.
Sources said that Cooke and California-based Lorimar Corp. are parties considered to be "potentially interested aggressive acquirers" who were not provided with confidential financial information by the company. One source said Michigan real estate developer A. Alfred Taubman also has been involved in recent discussions.
While Wall Street insiders insist that Evening News is likely to be sold in the near future, the company continues to say that it is not for sale. For example, company officials said yesterday that the confidential financial information was provided to interested parties merely to help Salomon Bros. determine the company's fair market value so that the Evening News board of directors can intelligently examine the financial alternatives.
In a letter mailed late last week to the company's stockholders, Evening News President Peter B. Clark urged the closely held company's 350 stockholders to reject Lear and Perenchio's takeover bid. In addition to claiming that the bid is financially inadequate, Clark also questioned the bidders' ethics, saying they induced an Evening News executive to provide them with confidential financial information while they were preparing their takeover bid.
"The board understands that an affiliate of Lear and Perenchio induced one of our senior executives to make unauthorized disclosures of highly sensitive and confidential information in breach of his fiduciary trust," the letter said. "The executive involved was promptly identified and because of his action, his employment was terminated. Your board believes Lear and Perenchio's participation in such activities, especially while preparing a secret hostile takeover attempt, raises serious questions about the business ethics of the group seeking control of our newspapers, television stations and radio stations."
Lear and Perenchio's bid has not attracted many Evening News shares so far, sources said, because most stockholders expect higher offers to be forthcoming. In addition, the takeover attempt has been hampered by a tough Michigan antitakeover statute. Lear and Perenchio are appealing a decision last week in a Detroit court calling for prompt enforcement of the statute.
The Evening News vigorously is opposing Lear and Perenchio's bid at the Federal Communications Commission. The bidders need FCC approval to acquire The Evening News because the commission must approve the change of control of the company's television and radio broadcast licenses. Lear and Perenchio have asked for FCC permission to use a trustee to hold tendered shares during the interim period prior to a final FCC ruling on their application.
Jack Kent Cooke recently became the first hostile bidder to receive FCC approval to use the trustee technique to expedite an unfriendly takeover in his attempt to acquire Multimedia. The Evening News has urged the FCC to reconsider its controversial decision to allow hostile bidders to use trustees.
"The commission should seize this opportunity to reconsider and rectify its Multimedia decision ," The Evening News said in an FCC filing. "The transfer of control to a voting trustee in a hostile situation inevitably will result in material changes in the operation and management of the target company.
"While the trustee may be for an interim period, these changes are not. It departs from common sense and corporate reality to suppose, as the commission did in Multimedia, that an interim trustee established pursuant to a hostile takeover can maintain the status quo of the target company. The ownership change will be substantial . . . a [trustee] exemption cannot rationally be justified."
The Evening News flagship newspaper, The Detroit News, has been involved in a fierce newspaper battle with Knight-Ridder's Detroit Free Press. Both newspapers have been losing money in this struggle to prevail. Ironically, the current fight for control of Evening News could end the newspaper war.
A new owner might be able to approach Knight-Ridder and ask for a cease fire in the battle by asking for a joint operating agreement that would combine the newpapers' financial operations while allowing editorial competition to continue. On the other hand, it is possible that Knight-Ridder could take advantage of this uncertain period at Evening News to try and gain the upper hand in the battle.