Saban May Exercise Put After All

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Haim Saban may soon be "putting" Rupert Murdoch, his purported friend and business partner, in a tight spot if he opts to force News Corp. to buy his stake in Fox Family Worldwide Inc. for cash.

Both Saban, who owns 49.5 percent of Fox Family, and Murdoch have retained investment-banking firms-Morgan Stanley Dean Witter & Co. and Bear Stearns & Co., respectively-to represent them in the company's potential sale, sources confirmed last week. The two brokerages will be called upon to calculate valuations for Fox Family Worldwide, whose holdings include the 79-million-subscriber Fox Family Channel.

If those valuations are too far apart, a third investment bank will be brought in for an appraisal.

As recently as a month ago, Saban had insisted he was happy with Fox Family Channel's progress and therefore didn't plan to exercise his so-called put option. But Saban reportedly had a change of heart when he saw the high $3 billion valuation that Black Entertainment Television, with 63 million homes, had fetched from Viacom Inc. BET's price tag was roughly 21 times cash flow.

Under the Fox Family partnership deal, Saban has until Dec. 31 to exercise his "put" and offer his stake in the company to News Corp. "for fair market value in cash." Earlier this year, Saban had valued the company at $6 billion, a figure that reportedly caused Murdoch to balk.

Last Monday, Saban's office issued a prepared statement which read: "Haim Saban values his longstanding relationship with News Corp. and is discussing the future of Fox Family with Rupert Murdoch and his team. Mr. Saban will decide shortly whether to exercise his right to require News Corp. to buy his interest."

But a source close to Saban said he was likely to exercise his put option, possibly as soon as this week. News Corp. officials couldn't be reached for comment last week.

If Saban does insist on cash from News Corp., and not stock, that could put a damper on Murdoch's effort to raise money to acquire Hughes Electronics Corp., which owns direct-broadcast satellite platform DirecTV Inc.

In fact, Standard & Poor's last week issued a warning that it would downgrade News Corp.'s debt rating to "negative" if the media giant is forced to buy Saban's stake for cash. The bond-rating agency believes a stock transaction would be to Saban's advantage.

In her report, S & P analyst Heather Goodchild wrote: "Standard & Poor's views Saban as having strong tax-related incentives to take equity in such a transaction, as it would result in a sizable taxable gain. Even so, an equity component would require Saban's consent.

"A buyout for cash, on top of the $1.4 billion to $1.5 billion of Fox Family debt that would be consolidated on News Corp.'s balance sheet, could put pressure on News Corp.'s ratings."

Goodchild also suggested that Saban and Murdoch might opt to sell Fox Family to a third party.

"A decision by Haim Saban to put his interest in Fox Family could come by Dec. 31, 2000, unless he and News Corp. agree to postpone the put date," Goodchild wrote in her report. "Alternatively, the two parties each may decide to sell their interests in the Fox Family company or in its key asset."

Fox Family, relaunched two years ago after Saban and News Corp. acquired it for $1.9 billion from Pat Robertson, has been struggling to find the right programming formula, one that appeals to contemporary families. During that period, Fox Family saw its ratings skydive, although its demographics have gotten younger.

Fox Family's most recent batch of original programming, may already have one casualty. The network last week pulled The Fearing Mind, an original, hour-long dramatic series off its schedule. Fox Family has yet to decide whether to put the low-rated show back on its line-up in February.

Also last week, Fox Family announced several new shows. Those include: a 26-episode order for a weekly comedy starring twins Mary-Kate and Ashley Olsen, which premieres this summer; The Fox Family High School Countdown, which debuts Jan. 20; and Edgemont, a live-action teen drama that premieres Jan. 13.

Fox Family, which is seeking a license-fee increase, is in the process of negotiating affiliation-contract renewals with several major MSOs. Last week, the network and the National Cable Television Cooperative said they had renewed their six-year carriage agreement.

Fox Family has also secured a new carriage deal with Comcast Corp. that runs through 2007. But sources said that renewal was tied to the settlement of a lawsuit that News Corp.'s Fox Sports Net and Fox Cable Networks Group filed against Comcast Corp. and Viacom Inc.

That lawsuit was related to Viacom's sale of its stakes in two regional sports networks, Home Team Sports and Midwest Sports Channel.

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