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Murdoch selling TV Guide
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June 11, 1998: 10:56 a.m. ET
TCI units to pay $2 billion in cash, stock for News Corp.'s top magazine
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NEW YORK (CNNfn) - News Corp. said on Thursday it agreed to merge TV Guide, the largest circulation magazine in the United States, and its related businesses into Tele-Communications Inc.'s Prevue program listing channel in exchange for about $2 billion in cash and securities.
As a result of the transaction, News Corp. and Tele-Communications Inc. (TCI) will each have control of about 48 percent of the voting power in the combined entity.
Wall Street analysts celebrated the transaction as a combination of two solid brand names in the area of program listing.
"Strategically, Prevue channel picks up a very strong brand name in TV Guide," said Philip Olsen, media analyst at UBS Securities.
The combination will allow both companies to market their services to sponsors as a one-stop shop for print and broadcast advertising, executives explained during a conference call with Wall Street.
"TV Guide is now a multiplatform juggernaut ... We expect to grow our circulation dramatically," said Anthea Disney, chairman and chief executive of News America Publishing Group.
"It will be a very formidable force going forward," said Gary Howard, chairman and chief executive of United Video.
Under terms of the definitive agreement, News Corp. will receive $800 million in cash and about $1.2 billion worth of stock in United Video Satellite Group Inc., a TCI unit. As a result of the deal, News Corp. will own about 40 percent of United Video.
TCI Ventures Group and Liberty Media Corp., two separately traded entities of TCI, will own about 44 percent. The remaining 16 percent will be held by public stockholders.
Shares of United Video (UVSGA) were up 2-1/4 at 39-1/4 in early trading on Thursday. TCI Ventures (TCIVA) rose 1/16 to 16-7/16 while Liberty Media (LBTYA) climbed 1/4 to 35. News Corp.'s American depositary receipts (NWS) were up 1-1/16 at 24-5/8.
On the conference call, United Video officials explained the transaction will result in $1.98 billion in goodwill write-offs. As a result of the deal, News Corp. will transfer to United Video about $175 million in earnings before interest, taxes, depreciation and amortization -- known as cash flow.
In addition to the magazine, the transaction involves the TVGEN entertainment web site and the soon to be acquired cable guide publisher TVSM.
The affiliate sales force of TVSM as well as certain administrative functions are targeted for elimination.
The deal is expected to result in cost savings of $30 million to $40 million over the next three years, executives said.
United Video will issue 30 million shares of common stock including 11,251,706 shares of class A common stock and 18,748,294 shares of class B common stock, not subject to adjustment.
TV Guide has a nationwide circulation of about 13 million.
The transaction, to be accounted for as a purchase by United Video, is expected to close in the fourth quarter of 1998 pending regulatory approval. TCI has already agreed to vote its 93 percent voting interest in favor of the transaction.
Merrill Lynch advised United Video in connection with the transaction.
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News Corp.
TCI
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