Broadcasting Firm May Sell Some Assets : Turner Restructuring Possible After Merger
Turner Broadcasting System, which has agreed to buy MGM/UA Entertainment, conceded Thursday that it is exploring a post-merger restructuring that could entail sale of assets or stock to reduce the mountain of debt that is to result from the purchase.
However, the Atlanta-based Turner organization maintained that these explorations are “separate” from the raising of $1 billion worth of financing for the acquisition itself.
Major Turner assets include Cable News Network, Atlanta superstation WTBS, the Atlanta Braves baseball team and the Atlanta Hawks basketball team.
Meanwhile, fresh doubts among some Wall Street traders about the chances of success for the MGM/UA deal has been reflected in a major drop recently in MGM/UA’s stock price. It had hit a high of $27 per share not long after Turner proposed to pay $29 in the acquisition.
MGM/UA stock fell $1 Thursday to close at $24 per share for the day on the New York Stock Exchange.
Wall Street analysts repeatedly have expressed skepticism that the debt that Turner will take on to acquire MGM/UA can be serviced from the combined companies’ cash flow.
MGM/UA had a $66-million net loss for the nine months ended last May 31. Its figures for the year ended Aug. 31 have not yet been reported.
Turner spokesman Arthur Sando said Thursday that New York investment banker Drexel Burnham Lambert is committed to raising the acquisition funds. He added:
“We are on schedule. We will be filing our registration next week with the Securities and Exchange Commission detailing the financing for the acquisition. We expect the acquisition to be completed at the beginning of November.”
And MGM spokesman Art Rockwell called “not true” the published remarks of unidentified industry sources that Drexel Burnham had persuaded Turner that it would have to either sell some assets or take a partner for the MGM purchase.
The Wall Street Journal, which quoted the sources, said it had been told that Drexel Burnham had approached potential buyers about an interest in Turner assets, including CNN.
Meanwhile, Drexel Burnham, which specializes in financing with high-risk bonds commonly called “junk” bonds, has made no comment recently.
Michael D. Brown, a managing director in its Los Angeles office, could not be reached for comment on the effort that he is directing to raise the funds for Turner.
In mid-August, Drexel Burnham notified Turner that it was “highly confident” of being able to raise the financing for the purchase.
Meanwhile, a troubling legal problem for MGM/UA has arisen from a conflict between its sale to Turner and a $45-million deal three days earlier with Rainbow Services to license rights to films owned by MGM.
While Turner and MGM sources say they don’t expect the dispute to affect the studio’s sale, MGM/UA chief Frank Rothman and Turner Chief Financial Officer William C. Bevins Jr. are expected to be in New York today for a meeting with Rainbow executives.
Both sides already have filed lawsuits in the matter. Last Friday, MGM/UA filed a suit in Los Angeles County Superior Court seeking to rescind the Rainbow deal. On Monday, Rainbow sued MGM/UA and Turner in federal court in New York, asking $100-million actual damages and $300 million for antitrust penalties.
One of the goals of the Turner purchase of MGM/UA presumably was to obtain rights to films for WTBS.