Plan to Finance Metromedia Takeover Disclosed : Murdoch May Use Public Offering
Media magnate Rupert Murdoch revealed Monday that he may make an initial public stock offering to help finance his $1.55-billion plan to buy Metromedia Inc., a key jewel in his plan to launch an ad hoc fourth television network in the United States.
Murdoch disclosed the plans along with other financial details about the purchase in papers filed late Monday afternoon at the Federal Communications Commission in Washington. The disclosure apparently came as a result of mounting political pressure among citizens groups and on Capitol Hill about his intentions.
Murdoch agreed in May to buy Metromedia’s six television stations, the largest group of independent stations in the country, by assuming $1.4 million in debt owed to Metromedia bondholders. The deal requires FCC approval, and under federal regulations, which prohibit cross ownership of media in the same city, Murdoch would have to sell his newspapers in Chicago and New York, where two of the Metromedia stations are located.
In the papers filed Monday, Murdoch revealed that he intends to finance the deal by issuing 1.25 million shares of preferred stock in a new company called News America Television Inc.
He then intends to pay off Metromedia’s current debtors by offering either cash or stock in his new company in exchange for their bonds.
If too many Metromedia bondholders want cash, however, Murdoch said he is prepared to sell some of the new stock publicly. According to the documents, Murdoch will have to persuade Metromedia bondholders to accept 1.15 million of the 1.25 million preferred shares to avoid making a public offering.
The documents also reported that Murdoch will ask the bondholders to give up certain protections they currently enjoy with the Metromedia bonds.
The documents said more details of Murdoch’s financial plans are included in a secret preliminary prospectus filed with the Securities and Exchange Commission on Oct. 23.
Murdoch apparently disclosed the plans under political pressure from citizens groups and congressmen who have objected to his efforts to launch a new television network in this country.
As late as last week, Murdoch’s application to buy the stations and his request for a two-year grace period in which to sell the newspapers appeared to be sailing through the FCC. Commission staff members reportedly had drafted papers approving both requests, and the commission was scheduled to rule on the application last Thursday.
However, a citizens group called Media Access Project charged last week that Murdoch’s application lacked sufficient details about his financing arrangements.
According to sources familiar with the commission, that, along with pressure from Capitol Hill, persuaded FCC Chairman Mark Fowler to abruptly pull Murdoch’s application off the schedule last Tuesday.
Murdoch was unavailable for comment Monday about the filing.
However, Andrew Schwartzman, executive director of the Media Access Project, said he remained dissatisfied with the amount of detail offered by Murdoch’s additional filings.
“There are still a lot of ifs and a lot of maybes and if nots, " Schwartzman said. “This is a shaky transaction, and the role of these bondholders is far from clear.”
In the papers filed Monday, Murdoch said his company will have other sources of money “sufficient to meet the balance of contractual obligations to Metromedia and to finance the operation of the stations for the three-month period specified by the commission after closing.”
Schwartzman’s group also has argued that, because Murdoch plans to launch a fourth network, the FCC should hold a public hearing on the proposed purchase, something the commission so far has not shown any intention of doing.