Canceled Show

When two companies agree to merge and then the deal falls through, neither side is likely to be very happy about it. Last week, after International Telephone & Telegraph Corp. called off its proposed get-together with American Broadcasting Companies, Inc., the reaction was not at all usual: sighs of relief were audible in the front offices of both companies.

For ITT Chairman-President Harold Geneen, who had hoped to fashion the two firms into a $2.5 billion telecommunications colossus, the decision was largely a matter of money. Announced in December 1965, the merger has been held up by Justice Department antitrust litigation after being twice approved by the Federal Communications Commission. During the delay, a sharp increase in ITT's stock sent its purchase price for ABC soaring.

With ITT common shares selling for about $68 at the time, Geneen's original stock offer was worth some $365 million. At last week's closing of $113, the total would have been about $605 million. To guard against just that sort of altered circumstances, ITT and ABC had specified that either side could withdraw if the merger was still hanging fire by the end of 1967. On New Year's morning, Geneen accordingly summoned his board, 45 minutes later informed ABC that the deal was off.

Sparing the Court. At first glance, ABC had plenty of reason to be disappointed. The No. 3 network behind NBC and CBS, it has been sorely strapped for capital to complete its switchover to color television programming, will need additional funds for coverage of this year's national political conventions. To help out its prospective partner, ITT last year advanced ABC $25 million, which must now be repaid--with interest--within a year.

Nonetheless, ABC greeted Geneen's news with what Vice President James C. Hagerty called "a sort of relief." After all, the ITT deal pretty much constrained the network from seeking other sources of help. Now free to maneuver, ABC may well issue new securities to raise the capital it needs. More likely, it will seek out new merger partners. Two possibilities: General Electric Co. and Litton Industries, both of which expressed interest in the network before ITT came on the scene.

Whatever its effect on the two companies, the breakup most certainly unburdened Washington's U.S. Court of Appeals, which was thus spared from having to reach a decision on the controversial merger--after deliberating on it for more than five months.

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