Westinghouse, CBS talks expected this morning


NEW YORK -- Westinghouse Electric Co. and CBS Inc. are to meet this morning to negotiate the terms of a formal takeover offer that Westinghouse hopes to make for CBS within the next several weeks, executives close to the discussions said yesterday.

But even as they gather at the New York City headquarters of Loews Corp., the company that is controlled by the chairman of CBS, Laurence Tisch, key issues remain unresolved. Those include the price Westinghouse would pay for CBS shares, as well as how quickly a takeover, which would involve the transfer of television station licenses, could win approval by the Federal Communications Commission.

Westinghouse, which would combine CBS' television network and radio and television stations with those of Westinghouse Broadcasting, wants to avoid a bidding war. The longer it takes to win FCC approval -- anywhere from 4 1/2 months to a year -- the greater the likelihood of such a battle.

Although Westinghouse officials declined to comment, several people with knowledge of the talks said Westinghouse representatives had already had discussions with the FCC about ways to shorten the waiting time for regulatory approval.

Regulatory delays are just one of the issues Westinghouse is weighing as it talks with CBS. A deal could mean Westinghouse would have to sell one of its other businesses -- which include electric power-generating equipment, sophisticated electronic systems and Thermo King mobile refrigeration equipment -- to keep its debt at a manageable level

Philip Verveer, who specializes in communications for the Washington law firm of Wilke Farr & Gallagher, said: "Typically in a circumstance like this, a company is going to be concerned that even though it has an agreement, as long as the FCC has not approved the stations transfer it is vulnerable to a rival bid. Understandably the acquiring company wants to shorten that period."

One possible method is the establishment of what the commission refers to as a voting trust. In such cases the FCC approves the transfer of stations into a voting trust and the transfer process is shortened to roughly one month.

But Mr. Verveer noted that the agency had permitted such trusts only in cases where there were bidding wars, as in the battle between Viacom and QVC for Paramount Communications Inc., which also owned television stations. In such cases the agency has generally not wanted to give the initial bidder an advantage in getting FCC approval ahead of rivals whose bids might be higher. The trusts in effect created what Mr. Verveer called "a level playing field."

One reason that the price of a deal between CBS and Westinghouse has not yet been determined may be regulatory timing. The longer it takes to close the transaction, the more Westinghouse might have to pay.

In any case, if the two sides are able to hammer out an agreement, it would be subject to board approval and FCC clearance.

A bidding war for CBS poses heavy risks for Westinghouse. It is widely expected that Westinghouse would have to sell some assets to buy CBS. Should Westinghouse then see the purchase of CBS fall apart, the company's position would be weaker in any future negotiations.

In its negotiations with CBS, Westinghouse is working with the law firm of Weil Gotshal & Manges, as well as J. P. Morgan & Co. The chairman of Westinghouse, Michael H. Jordan, has had a long and close relationship with Roberto Mendoza, a Morgan investment banker who advised him in a number of deals in Mexico when Mr. Jordan was head of Pepsico.

Mr. Mendoza declined to comment yesterday. An executive who knows Mr. Jordan well said last night that he has been very eager and decisive about buying CBS.

But if the price of CBS continues to rise, it could make the already complex talks even more so, particularly if the price passes $80 a share. Shares of CBS surged $3.625 yesterday, to $74.875, on the New York Stock Exchange.

CBS is working with Cravath Swaine & Moore, its longtime law firm, one person close to CBS said.

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