IFE HOLDING OUT FOR CASH
News Corp.-Liberty bid too low for buyout
News and Liberty are negotiating the acquisition of IFE with its controlling shareholder, IFE chairman Pat Robertson, sources confirmed Tuesday. Details such as price are not known, but a report in Tuesday's Los Angeles Times put the price at only $21.50, just $3.50 above IFE's closing price Tuesday of $18. Gabelli, whose funds own about 20% of IFE, declared Tuesday that if the price was that low, the deal "stinks to high heaven."
"I will vote for the deal when hell freezes over," Gabelli said. He values IFE at closer to $30-$35 a share, although other analysts on Wall Street say the stock's true value is closer to $25.
IFE's main asset is the Family Channel cable network, which had an estimated cash flow of $82.3 million last year, providing the bulk of IFE's cash flow of close to $100 million. Analysts say most cable network companies sell for about 15 times the cash flow, putting a value of $1.5 billion on IFE.
The structure of the deal is not known, including whether Robertson will retain part or all of his shareholding. IFE has been in talks with potential partners for the past year but past negotiations have always been blocked by Robertson's insistence on retaining control and use of Family Channel's valuable programming time for his religious program, the "700 Club."
But some of those obstacles have been overcome in the current negotiations, people close to News Corp. said. One Wall Street source said News chairman Rupert Murdoch, who backed Robertson's unsuccessful presidential bid in 1988, may be willing to allow Robertson to keep the "700 Club" on the air in the evening if Robertson was willing to accept a lower price for the company.
Murdoch's main interest in the Family Channel is its daytime programming, which he wants to use for Fox's children's programming. Fox Kids is considering four possible cable networks to take 12 hours a day of programming by the fall of 1998, Kids Network president Margaret Loesch said Tuesday, and the Family Channel is one of the networks.
Another option is FX, the cable network jointly owned by News and Liberty, although Loesch said FX was the "least likely" option.
Liberty already owns about 22% of IFE and it would likely increase its stake in IFE as a result of the deal. Liberty execs could not be reached for comment. An IFE spokeswoman declined to comment other than saying, as is standard policy, that IFE "routinely engages in discussions regarding transactions designed to improve shareholder value, some of which may be material if completed."
(Gary Levin in New York contributed to this report.)
