News Corp. Ltd. (NWS.N) (NCP.AX) on
Monday said it had agreed to buy TV station owner Chris-Craft
Industries Inc. (CCN.N) for $5.35 billion, creating a U.S.
television powerhouse that expands Rupert Murdoch's highly
profitable strategy of owning two stations in one city.
News Corp. controls the Fox television network and 22 U.S.
television stations, while Chris-Craft affiliates own 10
broadcast television stations.
The deal would give News Corp. 13 stations in the top 10
U.S. markets, with two stations each in New York, Los Angeles,
Salt Lake City and Phoenix. It also would add to News Corp.'s
existing dual ownership in Dallas.
In New York, News Corp already owns WNYW, Channel 5, and
the New York Post newspaper and with the purchase of
Chris-Craft would gain WWOR, Channel 9, a UPN affiliate. In Los
Angeles, News Corp owns KTTV, Channel 11; and two regional Fox
Sports cable networks; and would gain KCOP, Channel 13.
"I think it's a brilliant strategic move,'' Merrill Lynch
analyst Jessica Reif Cohen said. "They were a powerhouse
already, but now they are ahead by leaps and bounds,'' she said.
News Corp. on Monday said it agreed to pay about $85 a
share in cash and preferred securities for Chris-Craft -- plus
$165 a share for BHC Communications Inc. (BHC.A) and $150 a
share for United Television Inc. (UTVI.O), Chris-Craft's
Fox Entertainment Group Inc. (FOX.N), a majority-owned News
Corp. subsidiary, would operate the stations under its Fox
Television Stations unit.
News Corp. also would acquire about $1.4 billion in cash
from Chris-Craft and expects to raise another $600 million from
the divestiture of some of the TV stations.
In a conference call with analysts, News Corp. said the
deal includes no break-up fee to compensate either party should
the other terminate the deal.
Shares of Chris-Craft rose 16-1/4, or 26 percent, to close
at 78-3/4 on the New York Stock Exchange. BHC rose 11-1/4, or
nearly 8 percent, to close at 153 on the American Stock
Exchange; and United Television rose 6-3/4, or nearly 5
percent, to close at 142-3/4 on Nasdaq.
News Corp. stock rose 3/8 to close at 50-1/8 after earlier
trading as low as 47-3/8 on the New York Stock Exchange.
New York-based Chris-Craft has an 80 percent stake in BHC,
which operates the 10 TV stations in Chris-Craft's television
division. BHC owns three of the six Chris-Craft very high
frequency (VHF) television stations and a 58 percent stake in
United Television -- which owns the other three Christ-Craft
VHF stations and its four ultra high frequency (UHF) stations.
The deal would give News Corp. a number of cities with two
TV stations and 40.5 percent of the nation's television
audience -- putting it over the U.S. Federal Communications
Commission's current 35 percent cap.
News Corp. said it planned to divest some television
stations to comply with FCC guidelines and to swap others to
gain more cities with two television stations.
That duopoly strategy of having two stations in one city
allows media owners to add the second station at virtually no
cost and reap the additional revenue.
"For News Corp. it ends up being a great long-term move
because they have access to creating all these duopolies in
major markets,'' said Archana Basi, media analyst at T. Rowe
Price, a shareholder of Chris-Craft and News Corp.
She said the deal may start to "make people aware of the
duopoly potentials out there.''
"Chris-Craft was a unique asset, a great asset because of
the markets it's in,'' she said. "There are other affiliate
groups out there that a lot of the big networks may decide to
buy and try to create duopoly situations like the one News
Corp. is doing with Chris-Craft,'' she said.
Because of FCC rules, however, News Corp. said it would
most likely swap the Chris-Craft TV station in Salt Lake City
-- United Television's VHF station KTVX, an affiliate of Walt
Disney Co.'s (DIS.N) ABC network -- for another station
News of the deal came after Viacom Inc.(VIA.N) abruptly
announced Friday it had ended takeover talks with Chris-Craft.
"It's somewhat surprising that Viacom did not make this
acquisition,'' Reif Cohen said. "But I think they will come out
very well.'' Chris-Craft earlier this year sold its 50 percent
stake in the UPN television network to Viacom, which owns the
Although Viacom failed to win Chris-Craft, it avoided a
costly bidding war and stands to gain by swapping some of its
stations with News Corp as they each seek to comply with FCC
regulations, Reif Cohen said.
"I think it might work out well for them,'' she said.
Under the agreement, News Corp. would pay $2.13 billion in
cash and 73 million American Depositary Shares (ADRs),
representing 292 million News Corp. preferred shares, for
Chris-Craft, BHC, and United Television.
Each Chris-Craft share would be exchanged for $34 in cash
and 1.1591 News Corp. preferred ADRs -- or, under the deal's
guidelines, a Chris-Craft holder could opt to receive $85 in
cash per share, or 1.9318 preferred ADRs, News Corp. said.
The agreement would swap $66 in cash and 2.2278 preferred
News Corp. ADRs for each BHC share -- or, subject to
limitations, either $165 in cash or 3.7131 preferred ADRs.
Each United Television share would be exchanged for $60 in
cash and 2.0253 in preferred News Corp. ADRs -- or for $150 in
cash, or 3.3755 preferred ADRS.
News Corp. said 40 percent of the consideration in each
merger will be paid in cash and 60 percent in preferred ADRs.
Fox Entertainment would issue 122.2 million of its shares
to News Corp., which would increase News Corp.'s stake in Fox