NEW YORK (The Hollywood Reporter) — NBC Universal and broadcaster Paxson Communications unveiled a broad new agreement Nov. 7 that settles their long-standing legal and financial disputes. The deal includes the departure of Paxson founder Lowell “Bud” Paxson as chairman and CEO and gives NBC Uni an 18-month window to buy the company or find another buyer.
Paxson, the majority shareholder in the company who now takes on the title of chairman emeritus, was replaced as CEO as of Nov. 10 by Brandon Burgess, who has resigned his post as NBC Uni executive VP business development and international channels.
NBC Universal owns 32% of Paxson, a stake the company bought in 1999 for $415 million with the hope of raising it once the FCC eased restrictions on the number of television stations a single company can own. But even with the FCC’s relaxation of those limits during the past few years, NBC Uni still is barred from taking complete control of Paxson, which owns 60 UHF TV stations that reach 83% of U.S. TV households.
“We continue to believe that Paxson Communications has a compelling national platform,” NBC Uni chairman and CEO Bob Wright said. “This agreement gives Paxson Communications the flexibility to invite new partners and investors who do not face the same FCC limitations that we do and who are interested in investing in and programming a nationwide television distribution platform.”
Burgess stressed that it was his decision to leave NBC Uni, where he had been considered a rising star, to take the reins at Paxson.
“I really believe in these assets. I have for years,” Burgess said. “We’ve seen how hard it is for content providers to roll out new digital networks with a (subscriber base) of only 30 million-35 million homes. (Paxson) reaches over 90 million TV households on an analog basis. There’s a lot of opportunities for Pax that we hadn’t been able to follow up on. Now we will.”
Under the leadership of Lowell Paxson, the Paxson stations were steadfastly focused on wholesome, family-friendly programming. With the change in ownership, Burgess and his team will have more flexibility to seek a wider range of programming and prospective content partners.
NBC Uni Television Networks Group president Randy Falco suggested that the Paxson group could be an intriguing investment opportunity for innovative programming ideas from a new-media hotshot a la Yahoo! or Google.
“It may be that we just find a new financial partner, but it’d be great to find a creative partner,” Falco said. “The potential is unlimited when you think about a Yahoo! or a Google putting together something using the Paxson platform as an interactive search engine or something along those lines. We haven’t had those discussions with anyone yet, but there are plenty of ideas out there that are interesting.”
Under the agreement announced Nov. 7, NBC Uni bought for $25 million an 18-month call right for to buy all of Lowell Paxson’s shares. NBC Uni can exercise that right itself or transfer it to a third party, who in turn can exercise it. Whoever exercises the call right must also make a tender offer for all of the company’s class A common stock.
If NBC Uni or its transferee fails to launch a tender offer within the 18-month time frame, NBC Uni must under the deal deliver $105 million of its series B preferred stock to Paxson Communications for distribution to the firm’s class A shareholders excluding Lowell Paxson.
If it does exercise the option, NBC Uni will pay 25 cents per common A share and 29 cents per common B share for Lowell Paxson’s stake. In addition, it must make a tender offer for the remaining class A shares at $1.25 each. This price rises 10% annually until a tender offer is made. Lowell Paxson owns 100% of the firm’s class B shares and 10% of its class A shares.
For financially struggling Paxson, the new arrangement provides “some desperately needed financial relief” and extra time, said Anderson & Strudwick analyst Steven Marascia.
Although at this stage anything is possible, Marascia suggested that NBC Uni could structure a deal with a third party that would give it control of at least some stations fitting into its portfolio. “They will likely comb through the portfolio” to see what they can keep, he said.
Paxson shares were up 112% on heavy trading volume Nov. 7 to close at $0.87.
Cynthia Littleton in Los Angeles contributed to this report.
