NBC, fresh from a blockbuster deal to merge with Universal, is seeking to unwind an earlier partnership with Paxson Communications Corp., owner of the family-friendly Pax network.
NBC NOTIFIED the West Palm Beach, Fla.-based broadcaster on Thursday that it wanted the company to buy out its 32 percent stake in Paxson, which it acquired in 1999 for $415 million. The stake, with interest, is now worth $549.2 million, Paxson says. (MSNBC is a Microsoft-NBC joint venture.)
NBC and Paxson have been at odds over their partnership for several years. Two years ago, Paxson unsuccessfully petitioned federal regulators to block NBC’s acquisition of the Spanish-language broadcaster Telemundo.
Paxson also lost an arbitration proceeding in which it claimed NBC had violated the terms of their investment agreement. Paxson feared NBC’s deal with Telemundo would create regulatory hurdles that would prevent it from acquiring the rest of Paxson.
By asking Paxson to buy out its stake, NBC is giving up rights to acquire the rest of Paxson as allowed under their investment agreement. That frees up other potential buyers for the rest of the company.
Lowell “Bud” Paxson said in a statement that NBC’s request would help the company’s efforts to find a buyer. Last year Paxson hired the investment bank Bear Stearns to find a suitor, but so far none has emerged.
Nonetheless, the prospect that Paxson could be up for grabs led to a sharp spike in its stock price. Paxson’s shares, which trade on the American Stock Exchange, jumped 99 cents, or 20 percent, to $6 in unusually heavy trading.
Even as they moved to dissolve their partnership, Paxson and NBC disagreed over the terms of their arrangement. Paxson said in a statement that NBC’s request for a buyout wouldn’t cause a cash crunch because the company has no obligation to make the payment, and can choose instead to simply let the request expire in a year.
But Brandon Burgess, NBC’s executive vice president of business development, called Paxson’s claim “totally inaccurate” and said Paxson was obligated to complete the buyout. A Paxson spokeswoman declined to comment beyond the company’s statement.
The Pax network was launched in 1998 as a family friendly alternative to major networks. It reaches 88 percent of U.S. households, but mainly through low-powered UHF stations.
Pax relies heavily on reruns in its programming lineup and remains far behind the major networks in ratings. Last week Pax reached an average of 1.1 million viewers, according to Nielsen Media Research, far behind CBS’s 15.7 million and NBC’s 11.7 million.
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