UPN up for grabs

Chris-Craft to sell net stake or buy out Viacom

A New York State Supreme Court has ruled that Chris-Craft Industries and its BHC Communications unit must sell their 50% stake in the UPN television network or buy the half it doesn’t own from Viacom when a “buy-sell” provision triggered by Viacom last month expires Monday.

The price, either way, is $5 million. Under the terms of the provision, silence on Chris-Craft’s side would indicate that it will sell.

The ruling, out late Thursday, appears to put Chris-Craft in the hot seat and will clarify the status of UPN, which has been cloudy ever since Viacom agreed to merge with CBS Corp. last September. It means the 5-year-old network will have a new owner next week.

Some on Wall Street expect Chris-Craft and its owner Herb Siegel to sell Viacom UPN plus Chris-Craft’s TV station group. Most of those stations are UPN affiliates.

“Everywhere Herb Siegel looks, he has someone backing him into a corner,” said one analyst. Both partners have invested heavily in the fledgling net, but Viacom’s heft and its studio backing were key to UPN’s survival, with Chris-Craft clearly a junior partner in the arrangement.

Uneasy partnership

Chris-Craft sued Viacom soon after Sumner Redstone’s company triggered the buy-sell clause in the original UPN contract, with Chris-Craft claiming that Viacom’s merger deal with CBS itself violates a non-compete clause in the UPN contract. Viacom insisted, and Judge Herman Cahn agreed, that as the merger has not yet formally closed, Viacom is not in breach of contract.

“There has been no breach of fiduciary duty by Viacom (and) BHC must abide by the terms of the buy-sell provision, and the notice it has received from Viacom under that provision, and may not have an injunction barring closing of the merger agreement,” Cahn wrote.

“We are pleased that Judge Cahn has ruled in our favor and look forward to resolving the ownership of UPN,” Redstone said in a statement.

Chris-Craft officials weren’t immediately available to comment. The company could appeal the ruling, but time is tight as a judge would have to issue an injunction almost immediately to postpone the buy-sell deadline.

Unclear fate

The Viacom/CBS combination is expected to close in April. It remains to be seen whether the merged company would be able to keep UPN if it winds up owning it all.

Current FCC rules forbid outright ownership of two broadcast networks, although many in the industry believe Viacom/CBS would be able to get a waiver and keep both UPN and CBS. Viacom has said, however, that it will sell UPN if must do so to clinch the CBS deal.

Should Chris-Craft buy out Viacom’s UPN share, a USA Networks deal could make sense. USA Broadcasting owns stations in major markets such as Philadelphia and Boston, where UPN currently airs on Paramount’s owned stations.

Also, USA chief Barry Diller’s Studios USA network television and syndication divisions would benefit from the additional synergies.

Whatever the case, any change in ownership won’t take effect until 45 days after Chris Craft responds to the buy-sell provision.

Ironically, UPN will present its pre-upfront development slate to advertisers Monday on the Paramount studio lot in Los Angeles. That might make for some awkward moments if Chris-Craft exercises its option before the end of the day.

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