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PrimeStar, DOJ in talks
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September 28, 1998: 5:52 p.m. ET
Negotiations 'ongoing' to complete $1.1-billion merger with News Corp.
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NEW YORK (CNNfn) - PrimeStar Inc. and its five cable parent companies are conducting settlement talks with Justice Department officials to complete the merger of the direct broadcast satellite company with Rupert Murdoch's News Corp., CNNfn has learned.
In addition, News Corp. (NWS) officials have secured $650 million worth of senior secured debt from a group of banks to finance the transaction, said Chris Dixon, media analyst at PaineWebber.
The developments represent key missing links to complete the long-delayed deal, originally announced in June 1997. The Justice Department last May sued to block the deal objecting to the cable companies' ownership of a satellite television provider, which competes directly with cable operators for subscribers.
In early September, News Corp. and PrimeStar officials restructured the terms of their $1.1-billion merger, hoping to clear regulatory hurdles. Under terms of the revised offer, the cable companies' ownership in PrimeStar will be transferred to United Video Satellite Group Inc., a unit of Tele-Communications Inc.
Lawyers for all parties already met last Wednesday and are scheduled to meet again, a source familiar with the situation said.
"Talks are ongoing," the source said.
The source declined to characterize the talks except to say Justice Department officials were "receptive" to the revised terms.
"The parties have and expect to have those efforts substantially completed in approximately the next two weeks," according to a court filing.
Officials from News Corp. and PrimeStar declined to comment.
PrimeStar is jointly owned by TCI (TCOMA), MediaOne Group (formerly known as US West Media Group) (UMG), Cox Communications Inc. (COX), Comcast Corp. (CMCSK) and Time Warner Inc. (TWX) -- the parent of CNNfn. General Electric Co. (GE) also owns a small minority stake.
News Corp., which is partnered with MCI Communications Corp. in its satellite business, originally planned to sell $1.1-billion worth of assets to PrimeStar in return for a minority ownership stake.
But under terms of the revised offer, News Corp. will acquire the cable companies' stakes in PrimeStar asset with the help of TCI's United Video unit.
The selling point of the restructured deal for the Justice Department is supposed to be United Video's relationship to the TCI cable systems business, which will be placed into a separate entity as a result of TCI's landmark $48-billion merger with AT&T Corp. That is designed to insure regulators that it will remain competitive.
PaineWebber's Dixon said that company officials wouldn't have approached the Justice Department until financing was secured.
The earlier revised offer had valued the cable companies' holdings at roughly $6 a share, or $700 million. But the latest proposal now values the shares at a slight discount, Dixon said.
-- by staff writer Robert Liu
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