As I suggested, a bad deal. The proof is in the stock price:
NBC Investing in Paxson Comm.
By SETH SUTEL
.c The Associated Press
NEW YORK (AP) - NBC is investing $415 million in Paxson Communications Corp., giving the network a 32 percent stake in the television station group and providing NBC with another major outlet for its programming.
The deal announced today will also allow Paxson to beef up its programming lineup for its 72 television stations as well as its family-friendly PAX network, the nation's newest and seventh-largest network. Counting an additional 51 PAX affiliates, Paxson reaches 76 percent of U.S. households.
As part of the arrangement, NBC will also have the right to buy a controlling stake in Paxson after February 2002, if federal rules are changed allowing networks to own more television stations. In addition to the national network, NBC also owns 13 television stations in major markets.
NBC, which is a unit of General Electric Co., is paying $415 million in cash for new preferred stock in Paxson, which can be converted into an ownership stake of 32 percent of Paxson's common stock.
The management of Paxson, which is based in West Palm Beach, Fla., will remain in place, including chairman Bud Paxson.
``Today's investment is another step in our effort to seek out new platforms for NBC programming and content,' NBC president Bob Wright said. ``At a time of rapid change in the broadcast industry, we want to be invested as strategically as possible.'
Paxson became an attractive partner for other television companies following a major rule change last month by the Federal Communications Commission, which allowed companies to own more than one station in the same market, or a duopoly, if specific requirements are met.
Companies have been eager to take advantage of the ruling since owning two stations in the same city could lead to significant cost savings by combining back office operations as well as lifting the profile of the weaker station by adding top-tier programming from its new owner.
Since Paxson owns a large number of stations around the country, it became a logical partner for larger companies seeking to own two stations in the same city. It also owns many smaller stations, which the FCC ruling favored as takeover targets. Paxson's stock has been rising in recent weeks on speculation that a deal was in the works.
However, in Paxson's stock slipped $1.50 to $13.50 in early trading today on the American Stock Exchange. NBC's new preferred stock in Paxson is convertible at $13.01 per share.
After the FCC ruling came down last month, company chairman Bud Paxson made no secret of his interest in cutting a deal with another media company, calling his firm ``the prettiest girl at the duopoly dance.'
Talks about combining television stations was a major leading up to the blockbuster merger announced last week between CBS Corp. and Viacom Inc., which created a major vertically integrated media giant.
AP-NY-09-16-99 1007EDT |
