NEW YORK News Corp., owner of the Fox Television network, agreed to buy Chris-Craft Industries Inc. and two subsidiaries for about $5.35 billion in cash and stock to get 10 U.S. television stations, including KTVX Channel 4 in Salt Lake City.
News Corp., the global media company controlled by Rupert Murdoch, will pay Chris-Craft investors about $85 a share, a 37 percent premium to Friday's close. It also will buy BHC Communications Inc. and United Television Inc. Chris-Craft shares rose $13 to $75 in early Instinet trading while News Corp.'s American depositary receipts, each representing four ordinary shares, fell $1.75 to $48.
News Corp.'s group of Fox Television stations will have 33 U.S. stations after the acquisitions, with two apiece in each of five markets, including Salt Lake City, New York and Los Angeles. The purchases are expected to add to earnings immediately at News Corp. and at Fox Entertainment Group. Analysts said News Corp. is paying a high price.
"We would expect News Corp. stock to get hit" on the perception it may have paid too much, said Tom Burnett, president of New York-based Merger Insight.
In Salt Lake City, a source close to the industry in Utah said that under current regulations, established by the Federal Communications Commission, it would be unlikely that News Corp could retain both the Fox station, Channel 13, and KTVX, Channel 4.
The source speculated that Murdoch would either have to sell KTVX or it would have to drop its affiliation with the ABC network, an action that would diminish its value and thus seems unlikely. It also seems unlikely that it would drop Fox Channel 13, so the deal means that for the two stations to continue as they are, the FCC would have to make an exception to its own rule.
The transaction comes after Viacom Inc., the No. 3 media company, said Friday it had walked away from negotiations. Viacom, headed by Sumner Redstone and Mel Karmazin, was considered the leading contender to buy Chris-Craft.
"People will say, "Viacom passed, and they know the properties better than anybody, so it's likely News Corp. has to overpay,' " Burnett said.
In November, Murdoch said News Corp. was an unlikely bidder for Chris-Craft because the price was too high.
News Corp. expects the transaction to be completed by June 30, 2001.
The new stations will be operated under Fox Television Stations within News Corp.'s majority-owned unit, Fox Entertainment Group. Fox Entertainment will issue 122.2 million of its shares to News Corp. in return for the acquired assets. That will boost News Corp.'s equity stake in Fox Entertainment to 85.25 percent from 82.76 percent.
With Chris-Craft, Fox Television will have duopolies in New York, Los Angeles, Salt Lake City and Phoenix, in addition to Fox's existing duopoly in Dallas. In Los Angeles, the nation's second-biggest TV market, Fox will own two television stations and two regional sports networks.
"This unique opportunity to increase ratings and revenues through top-market duopolies should quickly deliver substantially increased profits for News Corporation and Fox," Murdoch said in a statement.
In total, News Corp. said it will pay about $2.13 billion in cash and about 73 million ADRs representing 292 million preferred shares. News Corp. said it will pay a maximum of 40 percent of the purchase price in cash and 60 percent in preferred ADRs.
Chris-Craft holders 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 pay $66 in cash and 2.2278 preferred ADRs for each BHC share. It will pay $60 in cash and 2.0253 preferred ADRs for each United Television share.
The acquisitions need regulatory and shareholder approvals. Chris-Craft owns about 80 percent of the common stock and 97 percent of the voting stock of BHC. It has agreed to vote in favor of the BHC acquisition. BHC, which owns about 57 percent of the common and voting stock of UTV, has agreed to vote its shares in favor of the UTV acquisition.
If the acquisitions don't receive FCC approval or an Internal Revenue Service tax-free ruling for the preferred ADRs, the companies have agreed to modify the structure of the agreements.
Under that plan, each Chris-Craft shareholder will receive $36 and 1.2273 preferred ADRs, each BHC shareholder will receive $69.30 and 2.3392 preferred ADRs, and each United Television holder will get $63 and 2.1266 preferred ADRs. The receipt of the cash and preferred ADRs will be taxable in the restructured transactions.