McCaw Cellular Communications is considering increasing its bid for Lin Broadcasting to $6.1 billion in an effort to strike a friendly acquisition agreement for the New York concern.
The announcement by the two big cellular telephone concerns, following a month of sparring, was the first indication that they have begun serious buyout negotiations. The companies said the current proposal would involve purchasing Lin intact, including the seven television stations Lin previously proposed to spin off into a separate company.
McCaw's proposed bid would amount to $127.50 a share, consisting of $110 a share in cash and the rest of the payment in common stock. Lin, which owns 35% of Los Angeles Cellular Telephone, has rejected previous McCaw bids, including McCaw's initial $120 a share all-cash offer worth $5.8 billion for the shares of Lin it didn't already own.
Kirkland, Wash.-based McCaw reduced its bid to $110 a share Monday after Lin lost a court battle to acquire interests in valuable cellular properties in New York and Philadelphia.
Wall Street reacted cautiously to the announcement. In over-the-counter trading, Lin's shares closed at $116.75, up $2.50. McCaw's shares closed at $40, down 25 cents.
Some investors may be valuing a cash and stock bid at a little less than $127.50 a share, said Thomas W. Friedberg, an analyst for the brokerage firm Piper, Jaffray & Hopwood. Also, he said, "with all this jumping around, McCaw's sincerity may be questioned."
Other analysts said Lin's fate is close to being settled. The announcement "suggests that the talks are going really well," said Alfred J. Humphries, an analyst with Hanifen, Imhoff Inc. in Denver.
The $6.1-billion proposal would be the biggest buyout ever in the cellular phone industry. McCaw, which has a 5% indirect interest in Los Angeles Cellular, is the nation's largest cellular phone firm.
The transaction under discussion would probably not be completed before Nov. 1, McCaw and Lin said.