NBC Buys 32% of Paxson for $415 Million

General Electric Co.’s NBC television unit said it bought a 32% stake in money-losing Paxson Communications Corp. for $415 million, gaining additional TV stations to air its programs in major markets.

NBC is getting new nonvoting Paxson preferred stock that’s convertible to common at $13.01 a share. It also has the right to buy as much as 49% of Paxson after Feb. 1, 2002, and to get a controlling stake for about $1.2 billion, or as much as $22.50 a share. Paxson, which owns 72 U.S. TV stations, also has 50 affiliates and reaches three-fourths of U.S. households.

Paxson Chairman Lowell Paxson, who created the Pax network last year to broadcast reruns of “Touched by an Angel” and other family-oriented shows, needs a deep-pocketed partner to cover losses, help with marketing and supply programming. NBC wants to use the Paxson stations to rebroadcast programs such as movies and miniseries and attract more viewers and ad revenue.

The agreement follows a Federal Communications Commission ruling last month that allows one company for the first time to own as many as two stations in big U.S. markets. Paxson stations overlap in 11 of the 13 markets where NBC owns stations, including Los Angeles, Chicago, Philadelphia, Boston, Miami and Washington.

The extra stations would give NBC the ability to blanket a single city with more of its own programming, which could help it command higher rates from local advertisers.

NBC bought just 32% because that’s all it’s allowed to own under current FCC rules. The companies are betting, though, that federal regulators will eventually lift TV ownership limits enough so that NBC can own most or all of Paxson.

In total, NBC’s agreement values Paxson at about $3 billion, including $380 million in debt and $500 million in exchangeable preferred stock, said Bishop Cheen, analyst at First Union Capital Markets Corp. in Charlotte, N.C.

Paxson shares Thursday fell $1.06 to $14, while GE rose $1.25 to $117.25.

Like all the major broadcast networks, NBC is losing audience share to cable TV, which has surged in popularity in recent years on the strength of such programs as “Biography” on the Arts & Entertainment network and “South Park” on Comedy Central. At the same time, the traditional networks must contend with escalating costs of programming in order to keep popular shows on the air.

For the broadcast season that ended in June, basic cable networks attracted 41% of total U.S. viewers, up from 38% in the year-earlier period. The broadcast networks had 54% of the audience, down from 55% in the previous season, according to Nielsen Media Research.