Hedging their bet

Johnson, TCI seek shareholder buyout

NEW YORK — Black Entertainment Television founder Bob Johnson and his main corporate backer, Tele-Communications Inc., on Thursday offered $288 million to buy out the public shareholders from BET Holdings in a deal that would remove the last independent cable network from public ownership.

The buyout offer follows the sale in the past week of Travel Channel to TCI’s Discovery Communications, Classic Sports Network to Walt Disney Co.’s ESPN and control of Food Network to E.W. Scripps, as independent networks sell out to bigger companies.

BET is the only national cable network targeted at African-Americans, and is in 50 million households.

In BET’s case, control won’t change but BET’s ties to TCI will grow. BET now is 46% owned by Johnson and 26% owned by TCI’s programming affiliate Liberty Media and the two have formed a joint venture to offer $48 a share for the outstanding stock. That will increase Liberty’s stake to roughly 40%.

The public shareholders, led by feisty money manager Mario Gabelli and influential investor Gordon Crawford, aren’t likely to go quietly. Analysts said the price is too low and Wall Street pushed BET stock up $10.50 Thursday to close at $51.50 in a sign that investors expect the offer price to go higher.

“The price is seriously skinny,” said Sal Muoio, principal of S.M. Investors, who estimates the stock is worth $70 a share based on BET’s earnings and prices paid for other cable network companies such as Intl. Family Entertainment.

Whether Johnson and Liberty have to pay more is up to an independent committee of BET directors that is to be formed to consider the offer. BET president Debra Lee said the company’s board would meet within a few days to appoint the committee and hire an investment bank as adviser. She declined to comment on the offer.

“I think that there will be a lot of heavy discussions and certainly I think the special committee is going to have an interesting job cut out for them,” Muoio said.

If the special committee doesn’t recommend a higher offer, unhappy shareholders have the option of going to court to protect their rights, Wall Streeters say, although that would cause a delay of at least a year.

Neither Johnson nor Liberty CEO Robert Bennett returned calls seeking comment about their offer, and their joint release announcing the bid gave no explanation as to why the bid is being made.

Wall Street sources said Johnson’s plans to diversify the company away from cable programming and into areas such as casinos prompted the bid. “It would be tough to get the public to go along (with those plans),” one analyst said, because new ventures usually lose money and would hurt BET’s profits.

In November, BET and Hilton Hotels announced a joint venture to explore building a casino and hotel in Las Vegas called the BET SoundStage Casino. In May, BET and the Walt Disney Co. signed a deal to open a BET SoundStage Club at Walt Disney World in Orlando, Fla.

Johnson gave no details about how he will finance the deal, although bankers said BET has little debt and could support debt taken on to pay for the buyout. Johnson and TCI are being advised by Salomon Bros., sources said, which is likely to arrange the financing.

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