McCaw Increases Bid for Lin, Aims for Control
Replacing hostility with honey, McCaw Cellular Communications sweetened its bid for Lin Broadcasting Tuesday, while lowering its sights from buying its mobile phone competitor to amassing a controlling interest in it.
The result would be the nation’s largest cellular telephone business.
McCaw offered Lin shareholders $125 a share for 22 million shares of common stock. That would be enough to expand McCaw’s present holding, about 5.1 million shares, to a tad more than a half interest.
The deal values all of Lin, which owns seven television stations, cellular-telephone franchises and a small publishing operation, at about $6.75 billion. Previously, McCaw had offered $120 a share for the 90% of Lin’s stock that it did not already own, but in July it lowered its bid to $110 a share, or about $5.8 billion.
Stock Moves Higher
McCaw has been maneuvering to block Lin’s proposed merger with the cellular subsidiary of Atlanta-based BellSouth, the so-called Baby Bell, which also provides local phone service in much of the Southeast. The object of both McCaw’s and BellSouth’s desire is currently the nation’s No. 7 cellular-phone operator. Whoever combines with Lin would become No. 1.
“We are determined to complete the acquisition of Lin in order to provide a vital link in the creation of a seamless, nationwide cellular network,” Craig O. McCaw, McCaw’s chairman and chief executive, said in a statement from company headquarters in Kirkland, Wash.
Investors responded to the news by bidding up Lin stock by $3.375 in nationwide over-the-counter trading to a closing price of $113.25. McCaw’s OTC stock closed unchanged, at $42.
Analysts had considered McCaw’s improved bid as necessary if it is to scuttle the BellSouth-Lin deal and protect its dominance of the surging mobile-phone business. BellSouth, already a major player, would present a serious challenge to McCaw if the merger succeeds.
“McCaw’s amended offer is designed to give Lin shareholders the best of both worlds--a premium cash price for a substantial number of shares and a guarantee that they will participate in the long-term growth in value of Lin’s assets,” McCaw said in his statement.
He added that he expects to complete the deal by the end of the year, and said his company will offer to buy the rest of Lin in five years or put it up for competitive bid.
McCaw now needs to raise almost $4.8 billion. It will pay nearly $2.8 billion for the Lin stock and another $1.9 billion for its purchase, announced last week, of Metromedia’s cellular interests in New York City. (McCaw agreed to buy Metromedia’s half interest in the Manhattan franchise, known as Metro One. The other half belongs to Lin, which has a 45-day right to match McCaw’s offer.)
Began in June
McCaw said it expects to receive commitments for loans totaling $4.5 billion from Morgan Guaranty Trust, Toronto-Dominion Bank and Provident National Bank. That, plus about $1.2 billion in cash and marketable securities that it already has in hand, “would be ample to fund the two purchases,” the company said. McCaw also expects to reduce its new bank debt early next year by applying the anticipated $1.3 billion in cash from its announced sale of certain cellular assets to Contel Corp. of St. Louis, Mo.
McCaw began its pursuit of New York-based Lin in June. After Lin rejected McCaw’s initial offer of $120 a share, McCaw persisted, but lowered the offer to $110 a share in July after a court denied Lin’s claim to a right to buy cellular franchises in Philadelphia and New York. The two companies then said they were talking about a merger at $127.50 a share, but the talks were broken off. Then came the announcement of a merger with BellSouth last month. McCaw responded last week by announcing that it would purchase Metromedia’s half interest in Metro One and sell other cellular properties to Contel, setting the stage for Tuesday’s revised offer for Lin.
As of last Friday, McCaw said, 7.8 million Lin shares were tendered. McCaw extended its deadline for Lin shareholders to tender or withdraw their holdings until midnight Oct. 27 in New York.
BACKGROUND McCaw has been maneuvering to keep Lin from merging with the cellular subsidiary of BellSouth. The company that combines with Lin, currently the nation’s No. 7 cellular-telephone operator, would become No. 1.
