NEWS CORP. TO ACQUIRE CHRIS-CRAFT
Rupert Murdoch's News Corp.
(NYSE:NWS), owner of the Fox Television Network, announced Monday that it will
acquire Chris-Craft (NYSE:CCN) and subsidiaries for about $5.35 billion, about
$2.13 billion in cash and approximately 73 million American depositary receipts
representing 292 million News Corp. preferred shares. News Corp. will buy out
Chris-Craft's 80%-owned BHC Communications (AMEX:BHC) subsidiary and BHC's
57.9%-owned United Television Inc. (NASDAQ:UTVI) subsidiary. Shares in
Chris-Craft jumped 14, or 23%, to 76 in Instinet pre-market trading Monday.
Under the terms of the deal, Chris-Craft holders have three options - they can
choose to get $34 in cash and 1.1591 News Corp. preferred American depositary
receipts, or they can choose to get $85 in cash, or 1.9318 preferred ADRs. News
Corp. will also buy BHC Communications Inc. for $66 in cash and 2.2278 preferred
ADRs for each BHC share and it will buy United Television Inc. for $60 in cash
and 2.0253 preferred ADRs for each United Television shares. News Corp.'s board
has already approved the deal.
News Corp. took a look at purchasing Chris-Craft last November, but shied away
saying the price was too high. Since then, the solid growth in its stock has cut
the number of shares it would need to issue to cover the acquisition almost in
half. News Corp.'s ADRs are up over 89% in the past 52 weeks, making it solid
currency for acquisitions. The company's Australian shares have risen 44% over
the same period to A$21.30.
The deal represents a 37% premium to Chris-Craft's closing share price on Friday
of 62. Combined, the companies will have estimated cash flow of $1.2 billion
annually. News Corp. expects the transaction to be immediately accretive to News
Corp. and Fox Entertainment Group earnings. Chris-Craft shares dropped 8 and
trading was halted on Friday after Viacom announced that all talks with
Chris-Craft were off. Shares in News Corp. were halted in Australia last week
pending the deal announcement.
Chris-Craft will add 10 stations to News Corp.'s 25, including creating
duoplolies for News Corp. in prime markets such as New York, Los Angeles,
Phoenix and Salt Lake City. Chris-Craft's San Francisco station is a welcome
addition to News Corp., representing one of the few top markets where News Corp.
doesn't already have a presence. News Corp. will have to get rid of at least two
stations to remain under the Federal Communication Commission's cap on total
News Corp. already covers about 34.5% of the U.S. through its current stations,
creating a regulatory question mark with the addition of Chris-Craft, which
reaches 22%. News Corp. has been lobbying the FCC heavily to relax its rule that
prohibits any company from owning stations that reach over 35% of U.S. viewers.
The company filed suit in May with the outcome still pending. Although the FCC
has given in on other regulations, the 35% rule still stands for now. Even so,
News Corp. will have a strong hold on U.S. media. In New York alone, the company
will own two television stations and the New York Post.
Although some analysts questioned the price tag for Chris-Craft, the majority
see it as a good strategic move for News Corp. News Corp. will enjoy huge
economies of scale with the additional stations, particularly duopolies in key
markets, and plans on reducing costs at Chris-Craft by combining programming,
news, engineering and sales in New York and Los Angeles. Fox Network, News
Corp.'s U.S. media division, has the distribution and the content to create a
second Fox network in strategic locations. If News Corp. can apply its own high
profit margins to Chris-Craft, the price tag will be worth it.
Last fall, Viacom agreed to buy CBS, a deal valued at $47 billion that places it
behind Time Warner (NYSE:TWX) as the second largest media powerhouse in the
world. It then indicated that it would pursue Chris-Craft. Not surprisingly from
the way the two disagreed on UPN, they could not reach an agreement. Viacom then
enacted a buy-sell provision in its UPN contract to end the partnership. After a
messy legal battle, in which Chris-Craft's BHC Communications sued to block the
merger with CBS stating that it violated the UPN partnership (a suit that was
denied), Viacom bought out the loss-generating station for a measly $5 million -
much less than Chris-Craft had invested in the network over the years.
Viacom owns 35 TV stations reaching almost 42% of U.S. viewers since its
acquisition of CBS, requiring Viacom to reduce its holdings to comply with FCC
guidelines. That is one reason it was so interested in Chris-Craft. Chris-Craft
owns stations in many of the same markets as Viacom. Viacom hoped to take
advantage of the FCC's duopoly rule that would enable it to reduce its
viewership percentage but maintain the same number of stations by acquiring
second stations in key markets. The FCC allows companies to hold two stations in
the same market, a relaxation of a previous rule, without having the second
station count toward the percentage of viewers the company reaches. Viacom would
have then reduced its holdings in markets where it owns only one station. Now
Viacom will probably have to find new affiliates for UPN, when its affiliation
agreement with Chris-Craft close down the operation.
GO-KARTS, EYE AND EAR DROPS RECALLED
The Consumer Product Safety Commission Monday
announced the recall of 91,000 go-karts and the Food and Drug Administration
warned Rich's MSM Eye & Ear Drops may be contaminated with yeast and a bacteria
that can cause sight-threatening injuries.
AMD UNDERCUTS INTEL WITH LATEST CHIP PRICES
Advanced Micro Devices Inc. finally
agreed to reduce the price of its 1-GHz Athlon microprocessors, introducing its
1.1-GHz Athlon in the process.
FORD: FIRESTONE PLANT HAD QUALITY PROBLEMS
Tires made at the Firestone plant in Decatur, Ill.,
during the mid-1990s had numerous quality control problems, according to data
released by Ford Motor Co. Monday.
WRAP: BROADCOM TO BUY NEWPORT COMMUNICATIONS FOR $1.24 BILLION
Broadcom Corporation, the provider of
integrated circuits enabling high speed broadband communications, said Monday it
has agreed to buy optical communications chip maker NewPort Communications Inc.
in a stock deal worth $1.24 billion, extending Broadcom's reach in the
Sithe Energies, Inc.
announced today that it has entered into a definitive agreement with PECO Energy
Company (NYSE: PE) under which PECO will acquire 49.9% of Sithe North America.
Upon completion of the agreement, the remaining 50.1% of Sithe North America
The European Union (EU) said Monday that it has
granted regulatory clearance to France Telecom's acquisition of the sole control
over the British mobile phone operator Orange.