NBC Universal and Paxson Communications Reach Strategic Agreement; Agreement Bolsters Strategic and Financial Flexibility of Bot
07 November 2005 - 2:51PM
Business Wire
NBC Universal and Paxson Communications Corp. ("Paxson
Communications") (AMEX: PAX) today announced a definitive agreement
that sets the stage for a strategic and financial restructuring of
Paxson Communications, which owns and operates the nation's largest
broadcast distribution system, consisting of 60 television stations
and reaching 83% of domestic television households (approximately
91 million homes) via its station group and cable and satellite
platforms. Under the new agreement NBC Universal and Paxson
Communications have modified the terms of NBC Universal's existing
Series B preferred stock investment and related agreements. NBC
Universal has acquired an 18-month call right from Paxson
Communications' founder Lowell "Bud" Paxson to purchase all of Mr.
Paxson's common shares, including his voting control shares.
Although NBC Universal cannot currently exercise the call right
under existing FCC rules, it may transfer the call right to a third
party who may exercise it (subject to all necessary regulatory
approvals). If the call right is exercised or transferred within 18
months, NBC Universal or its transferee will make a tender offer
for all of Paxson Communications' outstanding Class A common stock,
subject to all necessary regulatory approvals. If NBC Universal or
its transferee fails to initiate a tender offer in the 18-month
timeframe, NBC Universal will, as an alternative form of value,
deliver $105 million of its Series B preferred stock back to Paxson
Communications for distribution to Paxson Communications' Class A
shareholders (excluding Mr. Paxson). The form of the consideration
the public shareholders will receive depends on whether the call
right is exercised. Also, NBC Universal and Paxson Communications
have settled all pending legal disputes, including court
proceedings and arbitration, which will be dismissed. "NBC
Universal has been the largest financial investor in Paxson
Communications for some time, and we continue to believe that
Paxson Communications has a compelling national platform," said Bob
Wright, Chairman and CEO of NBC Universal. "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." "We believe this agreement with
NBC Universal will improve our Company's ability to realize the
value of its assets and distribution platform, while providing our
public stockholders an opportunity to receive enhanced value for
their shares," said W. Lawrence Patrick, Chairman of the Special
Committee of Paxson Communications' Board of Directors.
"Furthermore, the agreement affords the company the flexibility
necessary to attract strategic partners and investors, to improve
prospects for refinancing, and to more cost effectively strengthen
the company's balance sheet." Terms of the Transaction NBC
Universal has acquired a transferable 18-month call right on all of
Mr. Paxson's common shares, including his Class B voting control
shares. NBC Universal paid Mr. Paxson $1.00 per Class A share and
$1.15 per Class B share (a total of approximately $25 million) to
acquire the call right. The exercise price of the call right is
$0.25 per Class A share and $0.29 per Class B share. In order to
exercise the call right, NBC Universal or a party to whom it
transfers the call right must make a tender offer to purchase all
Class A shares held by the public shareholders (other than those
held by Mr. Paxson) at $1.25 per share. The $1.25 tender price will
increase at a rate of 10% annually until the tender is commenced.
In the tender offer, Paxson Communications' public stockholders
will have the option to sell their shares at the tender price or
retain their shares. If the call right is not exercised or
transferred within 18 months, then Paxson Communications public
shareholders (excluding Mr. Paxson) will receive instead $105
million face value of Series B preferred stock (increasing at a
rate of 10% until delivered) of a comparable rate type and equal
rank to that owned by NBC Universal and will retain their common
stock. In this circumstance, Paxson Communications would exercise
the call right to purchase and retire Mr. Paxson's control shares,
after which Mr. Paxson would no longer be a stockholder in the
company. As part of the agreement, NBC Universal agreed to reduce
the accrued and unpaid dividends on its preferred stock (which were
$288.6 million as of September 30, 2005 based on the disputed 28.3%
dividend rate) by $100 million and to accept $188.6 million of
additional Series B preferred stock issued by Paxson Communications
to NBC Universal in full satisfaction of all accrued dividends
through September 30, 2005. NBC Universal has also agreed to reduce
the annual dividend rate on the resulting $604 million in preferred
stock to 11% (reducing the annual dividend accrual on the Series B
preferred stock by approximately $50 million) and to extend the
redemption date of the Series B preferred stock from December 2009
to December 2013. The Series B preferred stock is convertible into
common stock, subject to FCC and other limitations, at a price of
$2.00 per share (reduced from $22.06 per share), which increases at
the same rate as the dividend rate. The Series B preferred stock
remains exchangeable at the option of the holder (subject to
certain conditions) into subordinated debentures with a maturity
date of December 31, 2009. NBC Universal also purchased from Paxson
Communications Series B preferred stock for $2.5 million and
cancelled warrants it held to purchase approximately 32 million
shares of Paxson Communications Class A common stock. NBC Universal
remains a non-attributable investor in Paxson Communications under
FCC rules. Paxson Communications Management and Board of Directors
As concurrently announced today, Mr. Paxson has resigned as
Chairman and Chief Executive Officer of Paxson Communications. R.
Brandon Burgess, who resigned from NBC Universal where he was
Executive Vice President of Business Development and International
Channels, joins Paxson Communications as a member of the Board of
Directors and will assume the responsibilities of Chief Executive
Officer of the company on November 10, 2005. Mr. Paxson was named
Chairman Emeritus, and he will continue to serve as single majority
stockholder of entities holding Paxson Communications' FCC licenses
until the purchase of his shares is complete and regulatory
approval has been granted. The transactions described in this
release were unanimously approved by Paxson Communications' Board
of Directors upon the recommendation of a special committee of
independent directors comprised of W. Lawrence Patrick, Henry J.
Brandon, and Raymond S. Rajewski. Lazard served as independent
financial advisor to the Special Committee. The Paxson
Communications Board also includes Dean Goodman, the company's
President and Chief Operating Officer, who will remain in that
position. The Board will recruit up to four additional qualified
independent director candidates to fill Board vacancies. The Board
of Directors has also appointed Mr. Patrick, who served as Chairman
of the Special Committee, as Chairman of the Board. About NBC
Universal NBC Universal is one of the world's leading media and
entertainment companies in the development, production, and
marketing of entertainment, news, and information to a global
audience. Formed in May 2004 through the combining of NBC and
Vivendi Universal Entertainment, NBC Universal owns and operates a
valuable portfolio of news and entertainment networks, a premier
motion picture company, significant television production
operations, a leading television stations group, and world-renowned
theme parks. NBC Universal is 80% owned by General Electric, with
20% controlled by Vivendi Universal. About Paxson Communications
Corporation Paxson Communications Corporation owns and operates the
nation's largest broadcast television station group. Paxson reaches
83% of U.S. television households via nationwide broadcast
television, cable and satellite distribution systems. For more
information, visit Paxson's website at www.paxson.com . Note:
Paxson distribution data provided by Nielsen Media Research.
Forward Looking Statements This press release contains
forward-looking statements that involve risks and uncertainties.
All statements herein that address activities, events or
developments that Paxson Communications Corporation expects or
anticipates will or may occur in the future, including its
estimates of financial performance, are forward looking statements.
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