BellSouth Agrees to New Merger Plan for Lin : Cellular: Phone firm is hoping to outbid McCaw and become No. 1 in the mobile-phone industry.

BellSouth Corp., trying to beat McCaw Cellular Communications for control of Lin Broadcasting, Friday agreed to a new plan to merge its cellular telephone operations with Lin’s.

Under the plan, Lin would increase a proposed special dividend payment to its holders to $42 a share from $20. Atlanta-based BellSouth also would assume more of the debt of the combined cellular company. That would allow Lin to pay the dividend and exercise its option to buy Metromedia’s 46% interest in a New York cellular telephone company for $1.9 billion.

New York-based Lin, already BellSouth’s partner in ownership of Los Angeles Cellular Telephone, also is Metromedia’s partner in cellular systems in New York and Philadelphia.

The deal, which will be presented to Lin shareholders for a vote in December or January, could prompt revision of a pending buyout bid for Lin from McCaw, the current leader in the cellular field.

Analysts disagreed about the value of the new merger proposal, compared to McCaw’s sweetened $125-a-share cash offer for a majority stake in Lin. But they agreed that BellSouth’s increasingly aggressive stance has put the battle in an entirely different context.

The bidder that combines with Lin would become the nation’s largest cellular company. A BellSouth victory would present a serious challenge to McCaw’s strategy for dominating the industry. A combined BellSouth and Lin would dominate the nation’s top 10 cellular markets.

But BellSouth’s aggressiveness may also force other regional telephone companies to act, said Fred Moran, president of Moran & Associates, a Greenwich, Conn.-based investment firm. BellSouth’s moves mean that the regional Bell companies created in the 1986 breakup of American Telephone & Telegraph “have come to life and will go after other cellular companies,” he said.

“We will see a string of acquisitions of cellular,” Moran said. “The other regional Bells are not going to do nothing and let BellSouth dominate cellular. The regional Bells will take out all of the independent cellular companies that are not protected.”

BellSouth’s merger with Lin would push it far ahead of San Francisco-based Pacific Telesis, which, among the regional Bells, currently has the largest stake in cellular systems.

Moran said he believes that the new BellSouth-Lin merger proposal is superior to McCaw’s current cash offer for a little more than half of Lin’s shares. Analyst John Reddan, also of Moran & Associates, said the investment firm believes that the combined company would trade on the open market at $86 a share. He put a value of $11 a share on Lin’s seven television stations, which would be spun off to current shareholders in a separate company as part of the proposed merger.

Those values, plus the special dividend, would place the BellSouth bid at $139 a share, he said.

Other analysts expressed doubts about the new merger proposal.

“I don’t believe this deal is significantly greater than McCaw’s offer,” said Thomas W. Friedberg, a Seattle-based analyst for Piper, Jaffray & Hopwood of Minneapolis. “McCaw still in the short term offers the better deal,” he said.

However, he added, evaluating the deal probably boils down to a “qualitative” judgment among shareholders, particularly large institutional holders, as to whether it’s better for the long haul to have Lin’s current management in control of the company, or McCaw.

Kirkland, Wash.-based McCaw said the revised BellSouth offer “still raises more questions than it answers.” Though BellSouth agreed to pay full value after awhile for Lin shares it wouldn’t own after a proposed merger, McCaw said its rival offered no assurances that such a deal would take place.

Additionally, McCaw’s statement questioned whether the dominance of the nation’s top 10 cellular markets by a regional Bell company would be in the public interest.

McCaw opened the bidding for Lin in June with a hostile $120-a-share offer, only to drop its bid to $110 a share when Lin lost a court bid to force Metromedia to sell its interest in New York and Philadelphia cellular systems to Lin. McCaw later revised its strategy, agreeing to give Lin shareholders $125 a share, but settling for less than all of the company.

The BellSouth bid pushed Lin’s share price up $4.63 to close at $112.63 in over-the counter trading Friday. McCaw closed in OTC trading at $37.75, down $2.50. In composite trading on the New York Stock Exchange, BellSouth closed at $52.125, down 78.5 cents.