Paul:
Looks like a possible 47% annualized return on CCN arbitrage.
Here is the recent Value Line Report updating on the progress of the merger:
"CCN's acquisition by News Corp. appears to be on track. For each CCN share held, stockholders would receive $34 in
cash and 1.16 shares of News Corp. preferred American deoisitory sares, worth a total of about $81 a share at NWS ADS
recent price. CCN shareholders would also have the option to choose all cash or all ADS, subject to the limitation that 60% of
the total consideration be paid in News corp. stock and 40% in cash. The stock portion should be tax free to CCN holders. If
the IRS does not grant the stock portion tax free treatment, the price would be about 6% higher. The cash payment would rise
by $1 a share if the deal soes not close by August 13th. The Department of Justice has approved the deal, leaving the FCC
approval as the main hurdle. The merger is expected to close by June 2001.
The merger would significantly strengthen News Corp's television operations. CCN would bring the buyer stations in NY, LA,
Phoenix, and Salt Lake City, where News already owns stations, creating 'duopolies' permitted by a regulatory change last
year. The duopolies would allow News corp. to cut news and advertising sales costs by combining those activities and raise
revenues by giving the company another channel for its sports programming. All told, we think the merger would be slightly
accretive to NWS's share net.
CCN recently renewed its affiliation with UPN through next season. UPN's season to date rating and share are the same as
last year's, thanks, in great measure to the continued popularity of WWF Smackdown wrestling, that appeals to the hard to
reach young male market segment. But CCN will probably suffer some from the current economic slowdown.
These shares, unranked for timliness, are trading below their merger value. CCN stock, however, will be supported by the fact
that 40% of the merger price is to be paid in cash. With News Corp. stock well off its 12 month high, we see little risk in
CCN shares and advise holders to retain their stock to receive the full merger value."
Of course the difficulty lies in valuing News Corp. Shares.
Tell me what you think. |
