NEW YORK (CNNfn) - News Corp. said Thursday it will hand over more information to U.S. regulators who have raised concerns about who will own the broadcast licenses acquired as part of its deal to buy Chris-Craft Industries Inc.|
The deal, announced last August and valued then at about $5.4 billion in cash and stock, reportedly had run afoul with the Federal Communications Commission amid worried that the agreement violates laws limiting non-U.S. ownership of U.S. TV stations.
The acquisition would give News Corp. (NWS: Research, Estimates), and its newly created unit NEWCO, control of 13 television stations in the nation's top 10 television markets, including a duopoly -- or two stations -- in the top two markets, New York City and Los Angeles.
FCC officials are questioning whether the purchase violates a 1995 ruling by the agency that limited News Corp. to acquiring stations only through its Fox Television Stations subsidiary, which is directly controlled by media mogul Rupert Murdoch.
In a letter posted on the Federal Communications Commission Web page -- the Mass Media Bureau says that based on the application "it appears that NEWCO is a corporation that may be 100 percent foreign owned and controlled."
Murdoch, whose News Corp. (NWS: Research, Estimates) holds vast entertainment properties spanning the globe, is a naturalized U.S. citizen, but News Corp. remains based in Australia.
Currently foreign ownership is limited to 25 percent. The letter requires News Corp. to explain this operating agreement, provide details of the level of foreign investment, and why this proposed ownership structure is in the public interest.
"We expected this request. The structure of this acquisition is exactly the same as previous deals that the commission has already approved," said Andrew Butcher, a New York-based spokesman for News Corp.
The FCC's decision could affect the final price that News Corp. pays for the stations. Originally, News Corp. said the deal was structured to be a tax-free transaction.
But should the parties be forced to rejig the deal, Chris-Craft (CCN: Research, Estimates) might face huge tax consequences, which would raise the cost of the purchase.
However, in August News Corp. stated that should the IRS rule the deal be taxed, it still will proceed, with Chris-Craft shareholders receiving the equivalent of an extra $5 per share in cash and stock.
The FCC's interpretation, should it stand, also could limit Murdoch's ability to acquire more stations in the future, the paper said.
American depositary receipts of the Australian company rose 13 cents to $35.94 on Thursday afternoon.
-- from staff and wire reports