Moving to erect a meaningful barrier against more hostile takeover attempts, CBS on Wednesday said it reached an agreement with Loews Corp. under which Loews will acquire up to 25% of CBS' stock and Loews Chairman and Chief Executive Laurence A. Tisch will join the CBS board.
The agreement gives CBS a significant takeover defense that has not previously been in its arsenal: a large block of its stock in friendly hands. Loews is expected to disclose to the Securities and Exchange Commission today that it intends to increase its CBS stake to 25% from its current 11.3%, a holding that already makes it the network's largest shareholder.
Previously, the largest shareholder was CBS founder William S. Paley, whose 8% holding is insufficient to dissuade hostile suitors.
Within a few days, Loews will also make a filing with the Justice Department, which is required under the Hart-Scott-Rodino Act before it can increase its holdings beyond 15%, sources said.
Victim of Takeover Speculation
Wall Street professionals and CBS sources characterized the agreement with Loews as a positive one for the network, which has been the victim of takeover speculation since Atlanta television magnate Ted Turner began his abortive attempt to take over the company last spring. Turner's campaign was decisively defeated when CBS completed the repurchase of 25% of its own shares on July 31.
"You could characterize CBS as reaching out to Tisch," one source at the company said.
"We're very pleased, for all the obvious reasons," said William Lilley III, CBS senior vice president for corporate affairs. He said Tisch will be elected at the directors' next meeting on Nov. 13 and will stand for reelection as part of the management slate of directors at the company's annual meeting next spring.
"This is clearly a very friendly invitation for (Tisch) to go on the board," said David Londoner, a broadcasting analyst for the New York investment house of Wertheim & Co.
In dual statements, Tisch and CBS Chairman and Chief Executive Thomas H. Wyman praised each other's abilities. Tisch "has a well-deserved reputation as a successful long-term investor in publicly held companies, and we welcome him to the CBS board," Wyman said.
Similarly, Tisch expressed "confidence in the management of CBS and in the company's ability to maintain and enhance its leadership in the broadcasting, records and publishing fields."
Loews, a conglomerate that derives its name from a theater chain from which it grew but gets most of its income from cigarettes, hotels and insurance, is managed by Tisch and his brother, Preston Robert Tisch. They are considered to be among the country's savviest investors.
"Larry Tisch is not a corporate raider," Londoner said. "He buys values." The brothers are known for their penchant, sometimes viewed as rare on Wall Street, for making long-term investments.
Announcement of the Loews agreement came after the close of the New York Stock Exchange. CBS stock had ended trading Wednesday at $117.50 per share, up 25 cents. Many on Wall Street believe that CBS shares are destined to sink to about $100 in the absence of any credible takeover possibilities, although word of the Tisches' interest may temporarily buoy the stock. Loews stock closed at $45.675 a share, up $1.125.
Loews' intentions were unclear when the company first announced in August that it had been accumulating CBS shares over the summer. Speculation first focused on the notion that the Tisches were engaging in a sophisticated tax-arbitrage play connected with the network's share repurchase. But Loews' continued buying after the repurchase ended led securities analysts to believe that the company was positioning itself to serve as a "white knight"--a palatable alternative to a hostile takeover.
Lilley said CBS "began to have a number of discussions" with the Tisch brothers shortly after they began their tax-oriented purchases. The invitation for Tisch to join the board "has been under discussion for several weeks," he said.