NBC a Surprise Bidder for FNN, Offers $105 Million

NBC emerged Tuesday as a surprise bidder for the beleaguered Financial News Network in a deal that could torpedo a 2-week-old offer from a joint venture formed by Dow Jones & Co. and Westinghouse Broadcasting.

FNN and NBC said they had reached a definitive agreement for the broadcast network to buy most of the cable programming assets of FNN for $105 million in cash. The Dow Jones/Westinghouse deal had been valued at about $90 million.

The higher bid “will best serve the interest of all the company’s constituencies,” said Allan R. Tessler, co-chief executive of FNN. The company insisted that its previous agreement was not binding and that final negotiations had not been concluded.

NBC stated that it would merge its Consumer News and Business Channel with FNN, creating a single business news channel available in about 30 million homes. CNBC, in which NBC has invested more than $50 million since its launch two years ago, has had difficulty gaining access to local cable TV systems due to a lack of channel capacity.

“After looking at all our options, we figured the best way to reach 30 million subscribers was to combine the two services,” said Tom Rogers, president of NBC’s cable subsidiary. “We are quite comfortable we can break even at that point.”

Al Barber, president of CNBC, said NBC would consult with cable system operators to find out how the industry would like the channel to evolve. “We want to take the best elements from the two channels,” he said.

Although NBC is not buying FNN’s cameras and technical equipment, Barber nonetheless expected a “fair number” of FNN’s 345 full-time employees to keep their jobs.

FNN, which was thrown into turmoil last year after the disclosure of financial irregularities, has about $142 million in bank debt and other liabilities. But even with NBC’s higher offer, FNN said it still would be unable to pay off all its obligations.

NBC had bid for FNN earlier this month, but its offer had been rejected as too low. Many in the cable industry were surprised when Dow Jones/Westinghouse outbid NBC, which had been considered the likely buyer.

Analysts noted that NBC’s bid appears to bolster the network’s commitment to stay in the cable business.

General Electric Co., NBC’s parent company, is said to be growing impatient with the network’s sinking ratings and perhaps is willing to sell it. An acquisition on the order of FNN would require the go-ahead from GE Chairman John F. Welch Jr. and possibly even GE’s board, company executives said. So Tuesday’s offer would seem to imply Welch’s continued support for the media business.

“They have clearly poured a lot of money into cable,” said Mark Riely, a partner in the New York investment firm of MacDonald Grippo Riely. “This should give them the distribution to be profitable.”

In a related move, NBC said Tuesday that it had bought back a 49.5% stake in CNBC from Cablevision Systems Corp., a Long Island-based owner of cable TV systems. Cablevision, however, remains 50-50 partners with NBC in the cable networks Bravo, American Movie Classics and SportsChannel America.

The NBC bid for FNN appears to leave Dow Jones and Westinghouse out in the cold. But FNN’s Tessler said the joint venture could make a “topping bid” once FNN files for Chapter 11 bankruptcy protection, a move that the company has said it will soon take.

Dow Jones and Westinghouse responded angrily to the surprise NBC bid, stating in a letter to FNN directors that they might “revise the terms of our offer, including the cash consideration, in a fashion that would make it substantially more advantageous to FNN than the NBC offer.”

Don Mintzer, president of Westinghouse’s Group W Satellite Communications, said the parties had been scheduled to conclude a definitive agreement by today. “We have a plan which we will vigorously pursue. The game is not over.” He would not elaborate.

Analyst Riely said the purchase of FNN may actually turn out to be more costly for NBC than two years ago when it considered making such a bid. After NBC consolidates the two channels, Riely explained, the eventual cost of the deal will soar far beyond $105 million.