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Technology Stocks : Primestar/TCI Satellite (TSATA) -- Ignore unavailable to you. Want to Upgrade?

To: Goodboy who wrote (61)	9/8/1998 4:17:00 AM
From: zebraspot	Respond to of 442

WSJ Story on NewsCorp Deal: >>News Corp. and TCI Affiliate Set Tentative Pact on Primestar By LESLIE CAULEY and JOHN LIPPMAN Staff Reporters of THE WALL STREET JOURNAL News Corp. and the United Video Satellite Group affiliate of Tele-Communications Inc. tentatively agreed to pay more than $700 million to gain control of the closely held satellite-to-home broadcaster Primestar Inc., according to people familiar with the matter. These people said that several issues have yet to be resolved before an agreement is made final. But the transaction, if completed, could pave the way for Australia's News Corp. to push aggressively into U.S. satellite broadcasting, a business that has yet to take off in the face of an entrenched cable-television industry. The deal envisioned would rid Primestar, based in Englewood, Colo., of four big cable-company investors that together own about a 60% stake, a situation that raised objections by antitrust regulators. The Justice Department earlier this year sued to block a plan by News Corp. to sell a crucial satellite slot it owned to Primestar, on the grounds that the deal would give the cable industry-controlled company the last available capacity for high-powered satellite television, which provides the only direct competition to cable. Since then, News Corp. has been looking for ways to reduce or take out the cable industry's investment in Primestar. Primestar's other big holder, with more than 30% stake, is publicly traded TCI Satellite Entertainment Inc., which isn't any longer a Tele-Communications affiliate despite the name. Small stakes also are held by General Electric Co. and by the Magness family and John Malone, chairman of Tele-Communications. Tele-Communications is scheduled to be acquired by AT&T Corp. next year. After that any Primestar holdings likely would wind up under the umbrella of what is currently TCI's programming arm, Liberty Media Group. Liberty is headed by Tele-Communications' Mr. Malone, who will have $5 billion available from AT&T for Liberty's expansion. Under a letter of intent dated Aug. 28, News Corp. and United Video Satellite Group, which is controlled by Liberty Media, would pay Primestar's cable-company owners about $6 a share for their estimated 118 million shares. Those shares currently are divided among Time Warner Inc. and some of its business partners (60 million shares); MediaOne Group (19.5 million shares), Cox Communications Inc. (18.9 million shares) and Comcast Corp. (19.1 million shares.) 'Standstill Agreement' The two-page, nonbinding agreement expires in 30 days unless a final accord is reached. One executive familiar with the situation said News Corp. is looking at the 30-day period as a "standstill agreement" to give it time to talk with possible partners and explore financing options. In addition, News Corp. wants to use the time to examine further the economics of the U.S. satellite market. Although News Corp. missed out on the early cable-TV boom, it holds a lucrative stake in the British satellite broadcaster British Sky Broadcasting Ltd. At the end of the quarter ended June 30, News Corp., led by Rupert Murdoch, had $2.6 billion in cash and $8.6 billion in debt. Considering the $2 billion to $3 billion that it is expected to reap from selling as much as 20% of its Fox Entertainment Group to the public, the company has ample resources to finance the Primestar transaction. Executives said the deal could still fall apart, noting that some cable partners aren't all that happy with the $6-a-share price. In addition, some cable companies are somewhat reluctant to sell out to Mr. Murdoch, who they consider a fierce archrival. Problem of Justice Department Still, such a transaction might solve one of Primestar's biggest problems: the U.S. Justice Department. In May, Justice blocked a plan by News Corp. to transfer two high-powered satellites and a license to Primestar in return for $1.1 billion in nonvoting Primestar securities. The Justice Department argued that the plan would thwart competition by allowing the cable-TV industry to control the strategic direction of a rival business that delivers video signals through the air rather than by wire. Primestar and others of its ilk are known as "direct broadcast satellite" providers, or DBS companies. Peter Boylan III, president and chief operating officer of United Video, declined to comment on any possible agreement with Primestar. But he said: "We think Primestar can be a very successful competitor in the high-powered DBS marketplace, with an appropriate ownership structure that would enable them to obtain high-power approval" from the Justice Department. Primestar, once rid of its cable owners, would probably have an easier time acquiring News Corp.'s satellites without government opposition. But it's unclear how the Justice Department would view United Video's participation, given that company's continued involvement with Tele-Communications. Some executives said they expect that the Primestar deal, should it go forward, will be structured to make it palatable to the Justice Department. One possible solution: United Video's ownership stake might be held in escrow until AT&T's acquisition of Tele-Communications is completed.<<