McCaw Trims Bid for Lin by $10 Per Share : Analysts See Action as a Bargaining Tactic
McCaw Cellular Communications on Monday reduced its bid for Lin Broadcasting to $110 a share from $120. McCaw said its new $5.3-billion offer reflects a court ruling that killed Lin’s effort to buy valuable cellular telephone systems in New York and Philadelphia.
Kirkland, Wash.-based McCaw was expected to lower its offering price in light of last week’s New York state court decision, but Lin said McCaw was being “cynical” and “abusive.” Lin, which rejected McCaw’s first tender offer last month, said: “We regard the McCaw move as a cynical tactical maneuver.”
Some analysts also viewed McCaw’s move as more a bargaining tactic than a reflection of Lin’s value. “I think it’s totally unreasonable,” Geoffrey Johnson, an analyst with Argus Research in New York, said after McCaw’s announcement. “It also seems to me to be self-defeating. Not many people were tendering at $120. People are not going to tender at that price.”
Wall Street seemed to be clinging to hopes that another offer would materialize or that McCaw would eventually put a few more dollars on the table. In over-the-counter trading, Lin’s shares closed Monday at $112.125, down $3.125.
McCaw acknowledged that few holders had tendered their shares but said it wasn’t unusual given that it has not received all regulatory approvals necessary to complete the offer. On Monday, McCaw extended the deadline for its offer by one day to July 21.
No Rival Offers
New York-based Lin owns 35% of Los Angeles Cellular Telephone, one asset that has made Lin a desirable target for McCaw. Lin also holds stakes in cellular systems in four other major metropolitan areas. Had Lin won its court battle to buy the New York and Philadelphia systems from Metromedia Inc., analysts estimated that Lin’s value would have increased by about $40 a share.
David J. Boczar, an analyst with New Japan Securities in New York, said he had valued Lin at $115 a share without the Metromedia properties. Boczar said he believed that McCaw was trying to “send a very sharp sign to Lin and its shareholders.” McCaw is out to “force Lin’s hand and make their shareholders very irate,” he said. No competing offer has emerged since its June 6 offer, Boczar said, giving McCaw leave to assert its view that the $120-a-share offer was a very good one.
A substantial number of shareholders may continue to hold out for a higher offer, Boczar said. But he added that “others may be inclined to take profits” at this point.
“This is a good way to scare people back in,” said Thomas W. Friedberg, a Seattle-based analyst for Piper, Jaffray & Hopwood of Minneapolis.
At $110 share, McCaw’s bid for Lin is still a record price in the booming cellular telephone business, almost doubling the previous record price per potential customer that British Telecom recently paid for a 20% interest in McCaw, according to analysts.