Money at Work

Since he moved from Los Angeles to Las Vegas two years ago, Billionaire Recluse Howard Hughes has bought up huge chunks of southern Nevada. Beginning with the Desert Inn, where he and Wife Jean Peters live in seclusion, Hughes has purchased a string of casinos, a flying service and more than 30,000 acres of land on which he envisions building a supersonic jet airport to serve the entire West Coast. Last week Hughes turned his attention eastward. Through his Hughes Tool Co., he offered to buy 2,000,000 shares of American Broadcasting Companies, Inc. or a 39% share of ABC stock that would cost him a cool $150,000,000.

The offer was a good one. ABC, third-ranking network in U.S. television, desperately needs money to convert completely to color and upgrade its programming; of the three major TV systems it was the only one that lost money last year on network operations. ABC's president, Leonard H. Goldenson, thought he had the wherewithal last year, when ITT agreed to buy the network. But the Justice Department entered objections, stalled the deal to the point that ITT Chairman Harold S. Geneen finally backed out because the value of ITT stock had gone up so much in the meantime that his offer was too good. Goldenson has been looking for a savior ever since.

On the basis of last week's offer, Howard Hughes did not look like a savior in Goldenson's eyes. According to the tender put together by Loeb, Rhoades (which should collect at least $500,000 in fees if the proposition goes through), Hughes would buy ABC shares at $74.25 apiece. That would be about $15 above the market price when the offer was first made, although the Hughes magic started ABC share values spinning last week, and the stock closed the week at 68 1/4, up ten points. A major objection from the network's viewpoint is that a cash purchase would make sellers liable to capital gains taxes. Goldenson would much prefer a stock swap that could be taxfree.

It is doubtful that the offer, which has another week to run, will succeed. The Federal Communications Commission has entered the scene, particularly because Hughes already owns one television station in Las Vegas (KLAS-TV) and control of ABC would give him five more stations, one above the legal limit. The FCC last week ordered Hughes not to try to exercise control of the network without its approval.

The commission also announced that it will schedule public hearings on Hughes's acquisition of ABC stock. In that case, Hughes might back out of the deal altogether. In 1963, in the course of a legal battle to regain voting rights on TWA stock that the airline's creditors had forced him to hand over to trustees, Hughes abandoned the suit rather than make a court appearance; he sold the stock for $546.5 million and ended his association with a company that had been among his most cherished assets. The best way to defeat Hughes seems to be to threaten him with the necessity of appearing in public.

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