Lin Broadcasting Rebuffs $5.8-Billion McCaw Cellular Bid

Lin Broadcasting on Tuesday rejected a $5.8-billion takeover offer from McCaw Cellular Communications and said it was talking to various potential buyers and exploring other alternatives.

The New York-based cellular telephone and broadcasting concern said the $120-a-share offer McCaw made on June 6 for the 90% of Lin that it doesn’t already own is inadequate. The offer, Lin said, discounted the company’s chances of acquiring Metromedia Inc.’s interests in cellular systems in New York and Philadelphia.

Lin is appealing an unfavorable court ruling in its bid to acquire Metromedia’s 45% interest in the New York system and 49% interest in the Philadelphia system.

While acknowledging that the outcome of the case is uncertain, Lin cited estimates by analysts that “a complete victory by the company in the Metromedia litigation could enhance shareholder value by at least $40 a share.” Lin said it is looking at ways it could turn a court victory into a direct cash distribution to shareholders.

Analysts say another reason Lin is attractive to would-be buyers is its 35% interest in Los Angeles Cellular Telephone, which serves the booming cellular market of Los Angeles and Orange counties.

Officials at McCaw Cellular’s headquarters in Kirkland, Wash., expressed disappointment at Lin’s reaction and requested access to any non-public information Lin might provide to other potential bidders. John W. Stanton, McCaw’s vice chairman, said in an interview that McCaw executives are interested in meeting with Lin officials to discuss the bid, which he termed “a full and fair offer” providing a premium over Lin’s price during the last six months.

Neil T. Anderson, a partner in the New York law firm of Sullivan & Cromwell, which represents McCaw Cellular, said the company’s bid reflects the current status of Lin’s Metromedia suit.

“If new material becomes available before the expiration of the tender offer, we will evaluate what that means,” he said.

After McCaw announced its offer two weeks ago, the price of Lin’s shares jumped to well above the price McCaw was offering, apparently on speculation that other bidders would emerge. Lin’s shares declined last week but climbed again on Tuesday to close at $125.625, up $2.625 from the day before in active trading.

“Traders like to see a company fight a bid. It suggests a higher offer is coming,” said Thomas W. Friedberg, a Seattle-based analyst for Piper Jaffray & Hopwood.

The regional Bell companies or GTE Corp. are considered the most likely to make a competing bid for Lin, partly because they are believed to have the financial resources to top McCaw’s offer.

Lin said it will continue with previously announced plans to spin off its broadcasting stations into a separate company. The move would “make it easier for a telephone company or a cable television company to buy Lin’s cellular systems,” Friedberg said.

In a Securities and Exchange Commission filing, Lin also said it has begun meetings with some prospective buyers and will contact others to determine their interest. Other options mentioned were a financial overhaul of the company and a possible special dividend to stockholders.

McCaw appeared to strengthen its hand in the bidding for Lin on Tuesday by completing the sale of a 20% stake in the company to British Telecom. The $1.37 billion in proceeds from the sale “is the cornerstone” of the financing for the Lin purchase, Stanton said.

McCaw’s stock closed Tuesday at $41.50, up 75 cents.