ABC Board Votes to Accept $3.5-Billion Takeover Offer : Network Dwarfs New Owner

American Broadcasting Cos. Inc. and Capital Cities Communications Inc. today announced an agreement under which Capital Cities will acquire ABC in a deal valued at more than $3.5 billion.

Under the agreement, which was approved by the boards of directors of both companies, each ABC shareholder will receive $118 in cash plus a tenth of a warrant that would allow the purchase of Capital Cities common stock at a set price.

Trading in ABC and Capital Cities stock was halted on the New York Stock Exchange today, and when it resumed after the merger announcement, the value of ABC shares shot up to $107 after closing last Friday at $74.50.

TV, Newspaper Operations

Capital Cities, which has both television and newspaper operations, was trading at $176 Friday.

ABC has been rumored as a possible takeover target for months, causing its stock to fluctuate widely. The network has been running third in the ratings this year, and analysts said its stock was trading at much less than the value of its assets--a circumstance that always draws the attention of corporate raiders.

Some analysts speculated that ABC executives had agreed to a friendly takeover by Capital Cities in order to avoid overtures by other possible suitors, including Cable News Network owner Ted Turner.

The companies said that, including the warrant provision, the deal is worth $121 a share to ABC stockholders. ABC has 29.1 million shares outstanding.

$1.1 Billion to Buy Stock

The agreement also provides that ABC may spend up to $1.1 billion to purchase its own stock pending the closing of the merger.

Fred Anschel, an analyst with the investment firm Dean Witter Reynolds Inc., noted that the much-smaller Capital Cities does not have much debt.

“They have excellent stations. Capital Cities management is regarded very highly by Wall Street because they have absolutely superb records,” Anschel said.

Capital Cities, which had revenues of $939.7 million last year, has ABC-affiliated television stations in Philadelphia; Houston; Hartford-New Haven, Conn., and Buffalo, N.Y. In addition, it owns CBS affiliates in Raleigh-Durham, N.C., and Fresno, Calif., and an independent station in Tampa-St. Petersburg, Fla.

50 Cable TV Operations

Capital Cities also holds licenses for 12 radio stations and owns 50 cable television systems in 16 states. It also owns the Fairchild Publications business newspaper group and its daily newspapers include the Times and the Star in Kansas City, Mo.; the Star-Telegram in Fort Worth, Tex., and the Oakland Press in Pontiac, Mich.

It was founded 30 years ago by a group of investors that included commentator Lowell Thomas and CIA director William Casey.

The ABC television group provides entertainment and sports programs for more than 200 affiliated television stations. ABC owns five of its TV affiliates, in New York, Chicago, Detroit, Los Angeles and San Francisco.

ABC’s radio division has 1,596 affiliated radio stations. It owns 12 AM or FM stations.

The company, which had revenues of $3.71 billion in 1984, is also involved in recorded music, publishing, video enterprises, motion pictures and scenic attractions.