McCaw Cellular Sweetens Bid for Lin Broadcasting
McCaw Cellular Communications Monday again sweetened its bid for Lin Broadcasting, offering $150 a share for a majority stake in the New York-based cellular telephone and broadcasting company, up from the $125 a share proposed last month.
But there was no indication that BellSouth Corp., McCaw’s rival for Lin, would back off.
McCaw said Lin holders also would receive a special dividend of one share of McCaw class A common shares valued at $16.17 a share for each share of Lin that they retain after the McCaw purchase. McCaw currently owns about 5.1 million Lin shares and is proposing to buy an additional 22.5 million of the 53.9 million shares outstanding for majority control.
Kirkland, Wash.-based McCaw stressed that it has commitments for the $3.5 billion needed to complete the tender offer and renewed criticisms of a rival proposal from Atlanta-based BellSouth.
“Our amended offer, which has a value more than $800 million higher than our earlier offer, is clearly the superior alternative for Lin’s shareholders,” chairman Craig O. McCaw said in a statement. His company is offering more cash and a “much stronger” guarantee of the value of Lin shares after the merger, he added.
McCaw, the nation’s largest independent cellular telephone company, targeted Lin in June with a hostile bid, primarily because Lin owns cellular properties in the nation’s big-city markets, including Los Angeles.
But instead of quickly snapping up its prey, McCaw met with determined resistence from Lin’s management, which sought as an ally one of the most powerful regional telephone companies created after the breakup of American Telephone & Telegraph. The bidding has steadily escalated as the parties have fought for control over the most promising properties in an industry that some believe will prove extremely lucrative and may one day compete with traditional telephone service.
As an alternative to a McCaw takeover, Lin proposed to merge its cellular telephone operations with those of BellSouth. BellSouth recently agreed to a sweetened special $40-a-share dividend to Lin holders as part of a restructuring that would also spin off Lin’s seven commercial television stations into a new company controlled by current Lin holders.
Analysts valued McCaw’s new offer higher than the BellSouth proposal, but said it isn’t a significantly higher value. More of Lin’s shares are now in the hands of arbitragers who will find the new McCaw offer very attractive because it includes more immediate cash, they said. However, they said they don’t expect BellSouth to withdraw because McCaw has upped the ante.
BellSouth is a conservative company reluctant to take on a high amount of debt and risk a lowering of its credit rating, said Thomas W. Friedberg, a Seattle-based analyst for Piper, Jaffray & Hopwood of Minneapolis. But he said he doesn’t believe that the bidding has reached BellSouth’s limit. BellSouth clearly has the financial muscle to take the bidding to a point where McCaw “simply could not compete,” he said.
The fact that BellSouth entered the bidding at a relatively high level indicates that they are willing to go the distance, said Dave Boczar, an analyst with New Japan Securities in New York. “They stepped in the game knowing they were facing a Craig McCaw who has a very big appetite for leverage,” he said.
BellSouth said it is studying McCaw’s sweetened bid, but that it saw nothing in the new offer that “approaches the full strength and value” of a BellSouth and Lin merger.
Jack Roberts, BellSouth Enterprises’ vice president for corporate development, said McCaw’s suggestions that the BellSouth proposal will face regulatory hurdles is without merit, as are its criticisms of BellSouth’s guarantees of the future trading value of the merged company. “They’re trying to focus on a single element when the totality of the two deals is different,” he said.
Lin said it is also studying the proposal.
In over-the-counter trading Monday, Lin closed at $120.125, up $4.375. McCaw closed at $35.75, down $1.25. In composite trading on the New York Stock Exchange, BellSouth closed at $51.75, up 50 cents.
