Westinghouse Joins Dow Jones to Buy FNN’s Network

A partnership formed by Dow Jones & Co. and Westinghouse Broadcasting has agreed to buy the cable TV operations of troubled Financial News Network, the companies said Tuesday.

The agreement marks the first major asset sale by the former financial empire created by Earl W. Brian, a neurosurgeon-turned-entrepreneur who used FNN as the cornerstone for investments in dozens of companies, including ailing United Press International.

Under the 50-50 joint venture, Dow Jones will handle all programming and production for FNN while Westinghouse will handle the business end, including affiliate relations, advertising sales and promotion.

The price was not disclosed, but FNN said it was less than the company’s total liabilities of at least $142 million. Sources close to the deal said the price was between $90 million and $100 million.

FNN’s other assets, which include a 51% stake in the Learning Channel and a 49% interest in Shark Information Services Corp., were not included in the sale. Even after those assets are sold, FNN said, the proceeds still would not cover the company’s liabilities. FNN reportedly had originally sought about $150 million for the channel.

Amber Gordon, a spokeswoman for FNN, said the company “expects to file a bankruptcy proceeding” before completing the sale of the cable channel. FNN owes $50 million to banks and $88 million in leasing obligations.

Dow Jones, which has limited experience in television, had considered a purchase of FNN in the past, but many observers had concluded that the country’s premier supplier of financial news had long missed the boat when it came to television.

Peter R. Kann, chief executive of Dow Jones, said FNN “clearly fits the Dow Jones strategy of providing the highest-quality business news and information however, wherever and whenever our customers wish to receive it.”

A Dow Jones executive, who did not want to be identified, said the company “has thought long and hard about this investment and we are confident that, in partnership with Group W, we can make money on it.”

The company produces the weekly Wall Street Journal Report, which is syndicated to 76 stations, and provides daily television news feeds to stations in Europe and Japan.

Dow Jones nonetheless has approached TV gingerly. When Cable News Network was founded 10 years ago, for example, Dow Jones turned down Ted Turner’s invitation to provide business news programming for the network, a decision some in the company have deeply regretted.

“Dow Jones has been interested in FNN for several years,” said Mark Riely, a partner in the New York investment firm MacDonald Grippo Riely. “This gives them a video outlet, one which I’m sure they hope will have international opportunities in the long run.”

Don Mitzner, president of Group W Satellite Communications, said each partner would appoint half of FNN’s six-member board.

“Aside from the purchase price, we are going to have to put some money into it for working capital,” Mitzner said. “But we don’t have a handle on how much yet.” For the fiscal year ended June 30, 1990, FNN reported a net loss of $72.4 million on revenue of $52.6 million.

The partnership beat out a handful of other bidders, including NBC, Walt Disney Co. and King World Productions.

The agreement most particularly is a blow to NBC, which analysts thought would have made a more aggressive bid to acquire its principle competitor. NBC owns the Consumer News and Business Channel, a financial and consumer news cable network in 17 million homes.

One source close to the transaction did not rule out another bid emerging, especially from NBC, perhaps within the next few days. “This is only an agreement in principle, not a done deal,” the source said.

Westinghouse Broadcasting, a subsidiary of Westinghouse Electric, owns five TV stations and 20 radio stations. But in recent years, Westinghouse has de-emphasized its broadcasting interests in favor of expanding into the cable business.

Westinghouse handles marketing for the Nashville Network in addition to owning one-third of cable channel Country Music Television. It has an interest in Home Team Sports, a sports channel in the Washington-Baltimore area, and recently acquired a stake in Prime Network, a consortium of regional sports networks.

FNN has 345 full-time employees and 160 part-timers in the production and programming area. Westinghouse is expected to retain some but not all of FNN’s advertising, marketing and affiliate relations staff.

Although FNN contends that the cable channel is available in 35 million homes, some prospective buyers questioned the stability of the subscriber base. About 28 million of FNN’s subscribers are full time, but 7 million subscribers do not receive the channel during prime time. Westinghouse’s Mitzner acknowledged that rebuilding the subscriber base is a priority, even though the cable industry is going through a sluggish time because of the recession.

The purchase of FNN by Dow Jones and Westinghouse ends five months of turmoil that began last October, when the company disclosed financial irregularities that resulted in big losses and later defaulting on its bank loans. Staff writer Victor F. Zonana in New York contributed to this story.