Six years of squabbling between NBC Universal and Paxson Communications Inc. has finally come to an end, with the cable and broadcast giant agreeing to buy a controlling stake in the smaller broadcaster and shunting aside founder Lowell “Bud” Paxson.
A deal struck last week also sweeps away legal challenges over recent strategic changes planned by Paxson — changing the broadcast network’s name to “i” from Pax TV and shifting from family friendly programming to concentrating on original series and movies from independent producers.
NBC bought a 32% interest in Paxson in 1999, paying $415 million and getting the right to buy the rest of the network in 2009. Since then the parties have argued about the structure of the agreement.
With the new deal, NBC Universal gets an 18-month call right to buy all of Bud Paxson’s stock in Paxson Communications, including voting shares.
NBC Universal paid Bud Paxson about $25 million ($1 per share for each class-A share and $1.15 per share for each class-B share) for the call rights, exercisable at 25 cents per share for class A and 29 cents per share for class B.
Meanwhile, chairman Paxson has become chairman emeritus. NBC Universal executive vice president of business development and international channels R. Brandon Burgess shifted over to become CEO of Paxson on Nov. 10.
To exercise the call rights, NBC Universal would have to make a tender offer for Paxson Communications shares at $1.25 each.
Because Paxson’s company owns about 60 television stations, NBC Universal could not immediately exercise the call rights. Current federal regulations limit the number of television stations one company can own.
If those federal rules don’t change in the next year and a half, NBC Universal can transfer the call right to a third party. Were NBC Universal or a third party unable to exercise the rights, NBC Universal would be required to pay Paxson shareholders (except Bud Paxson) $105 million in series-B preferred stock.