News Corp. to Buy Heritage for $1.35 Billion

News Corp. agreed to buy Heritage Media Corp. for $1.35 billion in stock and assumed debt, a deal that would swallow News Corp.’s main competition in product promotions in U.S. supermarkets.

The Australian media giant said it would pay $20.50 a share for Heritage, a 69% premium to Friday’s closing price. News Corp., owner of Fox television, plans to sell Heritage’s six television and 24 radio stations.

This year, News Corp.’s FSI unit entered the $1-billion supermarket promotions business, installing coupon dispensers on some of the 26,000 store shelves dominated by Heritage. FSI also distributes promotional inserts for newspapers and magazines.

“This acquisition gives News Corp. a much broader range of opportunities for promoting consumer products,” said Harold Vogel, an analyst at Cowen & Co.

News Corp.’s magazine and inserts division, which includes FSI, generated about $1 billion of News Corp.’s fiscal 1996 revenue of $9.9 billion. Dallas-based Heritage had 1996 revenue of $621 million.

News Corp. said it would pay for Heritage’s 38.6 million shares by issuing American depositary receipts valued at $754 million. It also will assume $600 million of Heritage’s debt.

Heritage shares soared $5.875 to $18 on the New York Stock Exchange. News Corp. shares lost 37.5 cents to $20.50 on the NYSE.

In January, News Corp. completed its acquisition of TV company New World Communications Group Inc. for $2.8 billion. Last month, News Corp. said it will form a $1-billion alliance with direct-broadcast satellite company EchoStar Communications Corp.

News Corp. said it will sell Heritage’s six network-affiliated TV stations and 24 radio stations. Analysts estimated the businesses would raise more than $500 million, or 10 to 12 times 1996 cash flow of about $45 million.

A News Corp. spokesman said the company expects no regulatory difficulties before completing the transaction.