NBC is opting out of its strategic alliance with Paxson Communications Corp.
Paxson confirmed that NBC has exercised its right under the 1999 arrangement that gave NBC just under one-third ownership in the company to demand that Paxson buy back the stake by Sept. 15, 2004.
Paxson placed a value on NBC’s holdings (41,500 shares of series-B stock) of $549.2 million as of Sept. 15, 2003. The value includes accrued dividends.
Paxson insisted that the development would not put a strain on its cash and liquidity (despite speculation to the contrary) because "the company has no obligation to complete the requested redemption."
If the company fails to redeem the NBC shares by Sept. 15, 2004, NBC’s recourse is to sell to a third party, whereby Paxson would have no approval right.
Between now and then, however, NBC gives up its rights under the alliance, including the right to acquire Paxson chairman Bud Paxson’s controlling stake in the company and certain approval rights of business moves the company makes, including the sale of assets.
Paxson said ongoing business ventures between NBC and Paxson -- including joint sales agreements between the two companies and NBC-owned stations and affiliates and Paxson stations -- would "continue in their current form."
In a prepared statement, Bud Paxson said, "We continue to work with our advisors -- Bear Stearns [Cos. Inc.] and Citigroup [Inc.] -- in exploring potential strategic opportunities to unlock the value of our national distribution system and network, including finding a new strategic partner, pursuing an outright sale of the company, or selling some or all of our assets."
He continued, "We believe NBC’s request for redemption provides clarity to the marketplace, and our discussions in the coming months with strategic partners and buyers will benefit from the temporary elimination of NBC’s path of control."