Despite Haim Saban's public posturing that he wants to stick by Rupert Murdoch, the Fox Family Worldwide chairman has retained an investment banker either to sell his majority stake in the company to its News Corp. partner or to shake out a buyer for the whole company.
Industry executives said Saban has hired Morgan Stanley Dean Witter to represent him in his "put," his right to sell his 49.5% stake to News Corp. The big task is trying to justify the $6 billion valuation for the company's assets that Saban was seeking just six months ago before he and News Corp. supposedly kissed and made up. Securities filings show that Saban has until Dec. 31 to declare whether he's going to trigger the put and News Corp. would have 30 days to complete the deal.
That valuation would make half the FFW assets worth around $3 billion. After Saban's share of Fox Family's $1.8 billion debt is subtracted, though, the executive's take would be worth $2.1 billion.
Some Wall Street and industry executives dismissed the valuation, given the poor operating performance of Fox Family Channel, the continuing revolt of TV stations over the Fox Kids syndicated block, and the pounding that media stocks have taken in recent months.
Saban's window comes at a terrible time. Murdoch is trying to stage a $30 billion bid for Hughes Electronics and its DirecTV, a move that would give him a long-coveted play in the U.S. DBS game.
With his stock price down 40%, Murdoch is not thrilled at the prospect of paying with that depressed currency either.
"Rupert can afford to give up equity," said one Wall Street executive. "He can't afford to give up cash."
Still, Saban is trying to stir interest from other media companies to motivate News Corp. into paying up, agree to take on a new partner or simply buy FFW outright. Companies being pitched are those most hungry for that rare media artifact, a fully distributed cable network: Viacom Inc., Sony Pictures and USA Networks Inc.
A couple of industry executives are looking at the same thing Saban is: the recent $3 billion sale of Black Entertainment Television to Viacom. That deal priced BET at 22 times cash flow and, arguably, $47 per subscriber. Valuing Fox Family Channel off its raw cable and satellite distribution, rather than its current shrunken cash flow, one former News Corp. executive said that he could come close to justifying Saban's asking price.
Under a shareholder agreement among Saban, News Corp. and Allen & Co., which owns 1% of FFW, Saban has the right to "put" his shares to News Corp., forcing Murdoch to buy them at market value. Each side retains an investment banker to value the shares. If their appraisals are too far apart, the companies hire a third banker to decide the fair-market value.
Saban doesn't have another clear shot at selling his stake for two years.
Saban and News Corp. could avoid a showdown by extending the put exercise date. "Stocks are down, why sell now?" asked one investment banker. On the other hand, if the economy and ad spending really are going into the tank, "Fox Family may not be worth much in two years."