THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Thursday, February 6, 1997 TAG: 9702060335
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: 93 lines
Shares of The Family Channel's parent, International Family Entertainment Inc., traded higher Wednesday on reports that IFE is negotiating a $1 billion sale of the company.
IFE, chaired by televangelist Pat Robertson, continued to decline comment on the reports. Stock analysts and others familiar with the company said there are indications that IFE is negotiating a transaction - but they weren't sure that an all-out sale of the company is in the offing.
IFE, which has about 300 employees at its Lynnhaven-area headquarters, closed Wednesday at $19.50 a share, up $1.50, in trading on the New York Stock Exchange. About 130,000 shares changed hands - nearly three times IFE's average daily volume over the past 60 days.
The heavier-than-normal trading came a day after the Los Angeles Times reported that IFE is negotiating a sale of the company to Fox Broadcasting parent News Corp., cable-programming giant Liberty Media Corp. and Pat Robertson and his son, Timothy.
According to the report, IFE would become a privately held company in which Fox and Liberty owned 40 percent stakes and the Robertsons, a 20 percent share.
Liberty is already IFE's largest shareholder. Its roughly 20 percent stake in IFE has a market value of about $190 million. Pat Robertson directly owns about 1 percent (a market value of $10 million at Wednesday's closing price) and is the trustee for a charitable trust that owns 6.6 percent ($61 million). Tim Robertson owns 5.5 percent ($51 million) of IFE.
Any deal would need the approval of the Robertsons because a special class of stock that they hold gives them voting control of IFE. That arrangement was part of the $250 million leveraged buyout of The Family Channel from Christian Broadcasting Network in 1990. IFE was the vehicle that the Robertsons and Tele-Communications Inc., a Liberty sister company, used to make that purchase.
CBN, which Pat Robertson also chairs, sold The Family Channel because the cable network's growing profitability threatened the broadcast ministry's non-profit status. CBN still retains an 8.2 percent stake ($75 million worth) in IFE. Regent University, which Pat Robertson founded and also heads, owns 8.9 percent ($80 million) of the company.
The only other major shareholders are two mutual-funds groups. Gabelli Funds Inc., headed by New York dealmaker Mario Gabelli, controls 15.3 percent ($140 million), according to its last filing with the Securities and Exchange Commission. Capital Group Cos. Inc. of Los Angeles owned roughly 10 percent ($95 million) as of its last filing.
IFE, which has annual revenues of about $300 million, has been a rumored buyout candidate for much of the past year. CBS, NBC and Sony Corp. were among those that reportedly held talks with IFE last spring and summer about potential buyouts or investments in the company.
All were interested because The Family Channel, one of the nation's largest cable-TV networks, has carved out a profitable niche with its brand of family-oriented shows. But executives of several of the other companies said they eventually backed off. They cited, among other things, resistance from IFE at bumping ``The 700 Club'' from The Family Channel's primetime lineup.
Carrying that CBN-produced show, which is co-hosted by Pat Robertson and runs weeknights at 10 p.m., costs The Family Channel more than $75 million a year in lost ad revenues, estimated John Reidy, an analyst for Smith Barney & Co. in New York. But IFE has said it is required to carry it as part of the buyout of the channel that Pat Robertson founded at CBN.
News Corp., headed by conservative media mogul Rupert Murdoch, is one suitor that has remained persistent. Sources said that company or its Fox unit have held discussions with IFE for at least six months.
In an interview last May, Tim Robertson declined to comment on any specific discussions. But he confirmed that IFE could benefit from an alliance with a larger programming company. Since major studios like Disney, Warner and Fox now control many of the key broadcast and cable TV channels, Robertson said he was concerned that the independent IFE may be put at a disadvantage acquiring programs that will help it increase viewership of The Family Channel.
George Shipp, an analyst in Scott & Stringfellow Inc.'s Norfolk office, said IFE could also benefit overseas from an alliance with a larger entertainment company. He said News Corp., which has operations worldwide, is a good fit from that standpoint.
Both Shipp and Smith Barney's Reidy agreed that the $1 billion price tag for IFE reported by the Los Angeles Times sounded low. At that price, the deal would equate to about $21 a share - well below the mid- to upper $20s price that each of them figures the company should command.
Whether IFE would remain based in Virginia Beach, in the event of a buyout, is uncertain. Some former employees of the company pointed out that Tim Robertson has said repeatedly in recent years that he believes the company is successful because most of its key decision-makers operate outside the Hollywood mainstream.
But one source said if News Corp., ends up as one of the major owners, there could be cutbacks in IFE's local operation.
``If any of this stuff is true and it's a major broadcaster,'' the analyst said, ``there will be some overlap, period.''
Shipp cautioned against speculation on such fine points. ``For all we know, some money manager in New York talked this thing up . . . and nothing's going to happen,'' he said. MEMO: Staff writer Larry Bonko contributed to this report.