Passion for Pax

As suitors eye NBC, net near $300 mil buy

NBC moved closer to a deal with Paxson Communications on Wednesday, as Wall Streeters and industry players pondered the Peacock’s future in the wake of the Viacom-CBS merger. The purchase could be announced as early as this week.

NBC has been talking to Paxson for months and was looking to buy 32% of the company, which owns a string of TV stations and the struggling Pax Net. It also has the option to increase its stake if the FCC changes its current rules to allow ownership of more than one network.

Financial details weren’t available, but based on Paxson’s current stock price, with no premium, the stake would be worth about $300 million.

NBC could use Paxson stations to roll out its ValuVision home shopping network or as outlets for NBC-produced programming. It could also help alleviate the Peacock’s more pressing need of ensuring it has national broadcast distribution at a time when some of its affiliates are balking at the network’s efforts to reduce its cash payments to affils. Sources said the deal apparently contains a stipulation that Paxson stations could be converted to NBC affiliates if need be.

Program exclusivity

NBC and other webs also have been tussling with their non-aligned broadcast affils over the issue of program exclusivity, as webs seek to repurpose news and sports programming on their sibling cable nets.

Still, analysts are lukewarm on the deal. Paxson’s 72 stations are on the low-powered UHF band and high on the dial, although many of them are in major markets; and NBC would have to divest some stations.

“I don’t get it. I don’t understand the business plan. Who’s going to buy those stations piecemeal?” one analyst noted.

Suitors flock to Peacock

With or without Paxson, Wall Street is busy evaluating NBC’s options as Viacom’s pending $35 billion acquisition of CBS will create a new media and entertainment powerhouse and another pairing of a studio with a TV network. One entertainment industry insider said that agreement has already caused potential merger partners or buyers to step up their wooing of Jack Welch, chief of NBC parent General Electric Co.

“The suitors have definitely revved up over the last two days,” the insider said, but added that Welch isn’t likely to jump at the first big offer.

“He’s not nervous, he’s not anxious (to sell),” the insider said. “He’ll sit back and take a look at everything carefully.” And he can afford to, since some inside and outside NBC believe being the last indie network makes the Peacock the prettiest pup in the dog show. Several Wall Streeters expect independent producers to start flocking to NBC.

As for suitors, “There are three of them and one of us,” said an NBC exec, who identified Sony, Barry Diller’s USA Networks and, perhaps even Time Warner as the most likely buyers or merger partners. An unidentified high-tech or Internet company has also expressed interested in a possible acquisition.

“NBC is the only network left. It’s in a great position. There are four unaligned studios (Time Warner, Sony, Universal and MGM), and NBC is very attractive,” said Merrill Lynch analyst Jessica Reif Cohen. But she thinks earnings-attentive GE would probably spin off NBC into a separately traded public company before doing any major deal.

Welch is retiring in a year or so, another analyst noted, “and he probably wouldn’t mind going out with a bang.”

Time Warner already has the successful WB Network in its fold and, under current FCC rules, couldn’t hold on to its cable systems and acquire NBC’s local stations.

The NBC exec said the biggest plus of any merger or other deal with Sony or Time Warner would be the global scope each company would bring to the table, allowing a combined company to compete internationally.

Pressure on Peacock

But Peacock insiders basically discounted the instant speculation that the Viacom-CBS union puts pressure on NBC to link up with a studio partner.

Peacock execs say they’re committed to building up the NBC Studios production arm into a steady supplier to the network, and hopefully outside webs. The division already delivered NBC a promising drama series, “Providence,” last season.

Over the long term, NBC wants to avoid another “ER” scenario — in which the web was forced to pony up a record $13 million per seg license fee last year to hang onto its top-rated show — by having its own internal source of programming.

But even the pinch of the “ER” renewal won’t force NBC into the arms of the first studio that asks for its hand. Because of its dominant position in primetime, the web has been able to command ownership interests or co-production arrangements with shows from some outside production entities.