News Corporation will pay $5.35 billion, comprising a cash payment of $2.13 billion and approximately 73 million ADRs representing 292 million News Corporation preferred shares.
The new stations will be operated under Fox Television Stations within News Corporation’s majority-owned subsidiary, Fox Entertainment Group. Fox Entertainment Group will issue 122.2 million of its shares to News Corporation in return for the acquired assets, increasing News Corp.’s equity interest in FEG from 82.76 percent to 85.25 percent.
The addition of the Chris-Craft stations will give News Corporation and Fox Television Stations an unequalled presence in the largest US television markets, with 13 stations in the top 10 markets and 20 stations in the top 20 markets, subject to the divestiture of stations as necessary to comply with FCC ownership restrictions. Chris-Craft’s integration into the Fox Television Stations group will create duopolies in New York, Los Angeles, Salt Lake City and Phoenix, in addition to Fox’s existing duopoly in Dallas. In Los Angeles, the nation’s second biggest TV market, Fox will own two television stations and two regional sports networks.
With the cost savings and revenue gains that are expected to result from the expanded competitive presence in major markets, the company expects the transaction will be immediately accretive to News Corporation and Fox Entertainment Group earnings.
News Corporation Chairman and Chief Executive Rupert Murdoch said the Chris-Craft stations, located in major television markets throughout the United States, perfectly complemented News Corporation’s existing group of 23 owned-and-operated stations.
This transaction gives News Corporation and Fox Television Stations a scarce commodity in a highly profitable industry. Fox will now have duopolies in three of the largest television markets in the US: New York, Los Angeles and Dallas. We are acquiring stations with tremendous upside potential, particularly given Fox’s strength in local news, entertainment programming, sports and sales, Mr. Murdoch said. This unique opportunity to increase ratings and revenues through top-market duopolies should quickly deliver substantially increased profits for News Corporation and Fox.
Mr. Murdoch continued: This acquisition will also help Fox expand and improve its services in local news, sports and entertainment programming in the communities we serve.
Herbert J. Siegel, Chairman and President of Chris-Craft, said: This merger delivers substantial value to all of the Chris-Craft, BHC and UTV shareholders and gives them the opportunity to participate further in the growth of News Corporation. Rupert Murdoch, a global visionary, has built News Corporation into one of the world’s pre-eminent media companies. We have the utmost confidence in News Corporation and Fox Television management’s ability to capitalize on our combined assets. I am pleased, as I’m confident all of our shareholders will be, to hold a significant investment in News Corp.’s dynamic future.
The transaction, which includes the acquisition of all of the shares of Chris-Craft Industries, Inc BHC Communications, Inc and United Television, Inc , is expected to be completed this fiscal year ending June 30, 2001. The transaction is subject to certain closing conditions, including regulatory and shareholder approvals. Chris Craft, which owns approximately 80 percent of the common stock and 97 percent of the voting stock of BHC, has agreed to vote its shares in favor of the BHC merger. BHC, which owns approximately 57 percent of the common and voting stock of UTV, has agreed to vote its shares in favor of the UTV merger.
Each Chris Craft stockholder will receive a combination of $34 in cash and 1.1591 News Corporation preferred ADRs (each representing four preferred limited voting ordinary shares). Each stockholder will be entitled to elect to receive instead, subject to the limitation described below, either $85 in cash or 1.9318 preferred ADRs. If this transaction closes after August 13, 2001, the Chris-Craft merger consideration will be increased by $1.00.
Each BHC stockholder will receive a combination of $66 in cash and 2.2278 preferred ADRs. Each stockholder will be entitled to elect to receive instead, subject to the limitation below, either $165 in cash or 3.7131 preferred ADRs.
Each UTV stockholder will receive a combination of $60 in cash and 2.0253 preferred ADRs. Each stockholder will be entitled to elect to receive instead, subject to the limitation below, either $150 in cash or 3.3755 preferred ADRs.
News Corporation preferred ADRs closed at $44.125 on Friday.
It is intended that the receipt of the preferred ADRs will be tax-free to the Chris Craft, BHC and UTV stockholders. The elections in each merger are subject to the limitation that 40 percent of the total consideration in such merger be paid in cash and 60 percent in preferred ADRs.
