Paxson’s preening

Stock surges as suitors circle broadcaster

Paxson stock popped higher Thursday on a new round of takeover speculation as the company seeks to extricate its increasingly valuable broadcast assets from a binding long-term deal with NBC.

The shares rose 11% to $11.79. The company and many other broadcasters have seen their stock surge as investors anticipate a stream of mergers in the sector. Last month, a federal appeals court issued two critical rulings: it struck down a ban on owning TV stations and cable systems in one market; and it ordered the FCC to rethink the 35% national cap on station ownership.

NBC, which holds a minority stake in Paxson and has an option to buy the rest, is the likeliest acquirer, although insiders say nothing is imminent. MGM, which just raised $174 million in a debt offering, has expressed interest. Most big congloms, Walt Disney in particular and large stations groups would covet duopolies Paxson can bring.

Pax wants to consider other suitors, which is one reason it’s in arbitration with NBC. Paxson claims the Peacock violated its contract by failing to follow through on certain programming promises and by purchasing Spanish-lingo network/station group Telemundo. That acquisition, Pax says, would make it impossible for NBC to buy Paxson unless Pax sold stations in several markets.

NBC execs have said Paxson simply seeks “to extract the company from a legal agreement that no longer suits its purposes.”

The pact would allow NBC to buy the rest of Paxson as of February, 2002. The option is valid through 2009, although Paxson would be able to buy back NBC’s stake anytime after Sept., 2004.

Paxson shares have had a nice run, up 72% from their 52-week low in October. Other broadcasters have done equally well and are among the strongest performers in the media space during a rocky period for the market.

Shares of Tribune, which closed at $45.16, are up more than 50% from their 52-week low.

Sinclair and Young Broadcasting have more than doubled from their lows. Unvision is up 66%, Meredith up 61% and Emmis up 32%.

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