Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, August 2, 1995 TAG: 9508030005
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Bloomberg Business News
DATELINE: NEW YORK LENGTH: Medium
The long-anticipated transaction will create the nation's largest owner of television and radio stations, reaching a third of all U.S. homes. It also will own the third-ranked broadcast network. Within two years, Westinghouse expects media to account for half of its operating earnings.
The abrupt shift is the clearest sign that Westinghouse Chairman and Chief Executive Michael Jordan is giving up on his plan to turn around the 109-year-old company by patching up its nuclear power and electronic equipment operations.
``This agreement will shake the mantle of Westinghouse being a very cyclical, stick-in-the-mud company,'' said Greg Drahuschak, an analyst at Janney Montgomery Scott.
The announcement comes a day after another major television network buyout. Walt Disney Co. said Monday it will purchase Capital Cities/ABC Inc. for $19 billion, a coupling that will create a formidable competitor and make Westinghouse's task of reviving New-York based CBS all the more difficult.
``Westinghouse is less financially strong than Disney,'' said analyst John Reidy of Smith Barney Inc. ``They also don't know how to run a network.''
Westinghouse Chairman and Chief Executive Michael Jordan said in a news conference he will seek opportunities for the network more aggressively in cable and overseas markets. The company will own 15 television stations and 39 radio stations.
``With the addition of CBS, Westinghouse is creating a premier broadcasting powerhouse and taking a leadership position in programming,'' he said.
In addition to $81 a share, CBS holders will receive a special payment based on the amount of time it takes to complete the transaction. The companies said they expect the purchase to be completed by early 1996.
The boards of both companies have approved the transaction. The agreement still needs the approval of shareholders and regulators and the completion of financing.
Shares in Westinghouse closed up $1.25 at $14.871/2. CBS stock was unchanged at $77.75.
Westinghouse has arranged $6.9 billion in financing for the transaction, according to an executive close to the company. Chemical Banking Corp. and J.P. Morgan & Co. each are providing $1 billion and plan to syndicate the remaining $4.9 billion to at least 30 other banks.
The $6.9 billion is broken down into $2 billion in a two-year loan, $2.9 billion in a seven-year loan, and $2 billion in a revolving bank loan, the executive said.
Apart from the price to buy the network, the loan will cover about $300 million to refinance bank loans and letters of credits, and funds to pay the investment bankers. Salomon Brothers represented CBS on the transaction.
Westinghouse is expected to sell assets to help pay off the $2 billion short-term loan. Jordan said $2.5 billion of debt would be paid off in three years through the company's cash flow.
The sale marks the end of Laurence Tisch's 10-year reign as controlling shareholder of CBS. Under his less-than-active stewardship, CBS has drifted to last place in the Nielsen ratings, even below newcomer Fox Broadcasting among younger viewers.``This agreement joins two great companies with tremendous depth and a rich history in broadcasting,'' said Tisch. ``This transaction also delivers terrific value for CBS shareholders.''
Westinghouse will have its work cut out. While General Electric Co.'s NBC and ABC have piled investments into U.S. and overseas cable ventures and gingerly begun tackling online services, CBS has tied its fortunes solely to network TV. Some analysts question whether Westinghouse is the best fit for CBS, because it does not have a stellar track record in the broadcast business.
by CNB