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By LORI BECKER Palm Beach Post Staff Writer
Paxson Communications Corp. founder Lowell "Bud" Paxson is stepping down as chairman of his namesake network, giving NBC Universal a chance to take greater control over the beleaguered West Palm Beach-based broadcaster.
The deal announced Monday ends the longstanding legal disputes between the two TV companies and opens the door for another investor to take control at Paxson, the least-watched of the nation's six national networks.
"This is really the best of all worlds," said Brandon Burgess, an NBC executive vice president who will take the helm as Paxson's chief executive officer Thursday. "The companies are reconciling their differences and putting (Paxson) in a position, with a new management team, to maximize its value."
NBC, which owns a 32 percent stake in Paxson, paid $25 million for an 18-month option either to buy Paxson's shares or find a third- party buyer.
However, NBC can't buy a controlling interest in Paxson because of Federal Communications Commission rules that restrict the number of TV stations one company can own, Burgess said.
The option gives NBC "a significant say over who the potential partner would be," he said.
To take the option, that buyer must make a tender offer to all Paxson Communications' public shareholders, excluding Bud Paxson, at a price of $1.25 a share. If the option is not taken or transferred within 18 months, Paxson Communications' shareholders will receive $105 million worth of the company's preferred stock.
Paxson's stock (Amex: PAX) soared on the news Monday, as shares jumped from 41 cents to more than 90 cents by 10 a.m. The stock closed at 87 cents, with more than 4.2 million shares changing hands Monday, compared with an average daily trading volume of 176,000 shares.
NBC's larger role in the company probably will raise Paxson's profile, media analysts said.
"At least you have some sort of leverage. There's a value there," said Brad Adgate, senior vice president and corporate research director for Horizon Media Inc., a New York-based ad-buying firm. "But it depends on what they do and where they go and what vision the new owners have."
Talks of a sale or merger have swirled around the financially troubled Paxson for years. Burgess said he and Paxson President Dean Goodman, who remains at the company under a new three-year contract, have long worked to facilitate a sale. But Bud Paxson blocked such a deal, analysts said.
"Unless we come together, we're not creating the maximum value of these assets," said Burgess, pointing to Paxson's network of 60 TV television stations nationwide, including WPXP-Channel 67 in West Palm Beach.
Bud Paxson was unavailable for comment Monday. He remains chairman of Paxson Management Corp., which operates the network's TV stations, Goodman said.
Paxson, who has been in broadcasting for more than 48 years, created the family-friendly PAX-TV network in 1998.
In 1999, NBC, which is owned by Fairfield, Conn.-based General Electric Co., bought its stake in the company for $415 million, with an option to become majority owner in 2009.
The two companies have had a rocky relationship as Paxson struggled with tumbling ratings, massive cutbacks and a stock price that has sunk from about $12 in 1999.
Burgess and Goodman said they plan to spend the next several months developing a new programming strategy, reviewing proposals pitched to the network over the past few years.
Paxson has the lowest ratings by far of the nation's six networks. They've been falling since 2001, when its average prime- time audience peaked at nearly 1 million households, according to Nielsen Media Research. Last month, about 440,000 households tuned in to PAX-TV on an average night, Nielsen data shows.
This summer, the broadcaster changed PAX-TV's name to "i" in June with plans to sell airtime to independent producers. NBC Universal released a statement criticizing the move.
"There's a lot of potential there, but as TV gets to be more and more competitive it's going to be harder for PAX, regardless of who buys it, to rise above that," Adgate said.
"You've got to create a franchise show. That's what puts you on the map."
PAXSON'S HISTORY
1991: Lowell 'Bud' Paxson founds Paxson Broadcasting.
1998: Paxson creates PAX-TV.
1999: In September, NBC buys a 32 percent stake in PAX-TV for $415 million.
2001: PAX-TV average prime-time audience peaks at nearly 1 million households. Amity between NBC and Paxson collapses when NBC announces plans to buy Hispanic broadcaster Telemundo. Years of legal wrangling between the companies begin.
2002: Paxson cuts PAX-TV's operational costs by $25 million. The Los Angeles sales and promotions office is closed and 100 employees are laid off.
2003: In November, NBC says it wants it out, telling Paxson to find another investor.
Feb. 7, 2005: Paxson lays off 50 employees, including PAX-TV Network President Bill Scott.
June: Paxson remakes PAX-TV into an independent television network called 'i.' Independent producers will pay Paxson to air content on the network's 60 stations.
Nov. 7: Bud Paxson resigns, gives NBC the option to buy his controlling stake in his firm.
Source: Staff research
