Focusing its efforts on a new relationship with Vivendi Universal, NBC on Thursday said it was breaking up with its partner of four years, Paxson Communications Corp.
NBC demanded repayment of its investment, now worth nearly $550 million, which could force the nation's smallest broadcast network to sell much of its holdings.
In a statement, Paxson Chairman Lowell "Bud" Paxson said the West Palm Beach, Fla., company would explore "finding a new strategic partner, pursuing an outright sale of the company or selling some or all of our assets."
NBC in 1999 paid $415 million to buy a 32% interest in Paxson, which airs family-oriented fare such as "Miracle Pets" and reruns of "Bonanza." The move was part of NBC's strategy to boost its distribution through Paxson's 61 TV stations.
But the partnership soured over disputes over programming, and NBC's purchase of a Spanish-language network.
According to NBC, Paxson never relinquished programming control.
"The business plan isn't working and the Paxson management team hasn't delivered results to lead to positive cash flow," said Brandon Burgess, NBC's executive vice president of business development.
Paxson unsuccessfully challenged NBC's acquisition of Telemundo, saying it prevented the General Electric Co. unit from buying out Paxson since the Telemundo stations extended NBC's reach of the U.S. audience close to the federal limits.
Now, NBC is exercising its option to require Paxson to buy back the network's 41,500 shares as it shifts its focus to acquiring Vivendi's Hollywood assets.
If approved by regulators, the NBC Universal merger will allow the network to extend its reach through cable channels rather than over-the-air stations.
On Thursday, Paxson assured investors that the company would remain viable in part because it had raised $100 million during the last year. It has a year to buy back the NBC shares.
Major media companies with room to grow under federal ownership limits include Walt Disney Co. and Metro-Goldwyn-Mayer Inc. "We're always looking at all opportunities to expand our distribution operations," an MGM spokesman said.