• by Wayne Friedman , November 8, 2005

Although NBC Universal had enough problems this year--with its prime-time schedule still delivering sub-par ratings--it is seemingly getting rid of one TV headache.

After years of legal wrangling, NBC Universal and Paxson Communications struck an agreement in which Paxson founder and Chairman Lowell "Bud" Paxson will step down as chairman, as well as from his position as a board member. Brandon Burgess, executive vp of business development and international channels for NBC Universal, will become CEO of Paxson Communications.

NBC also announced a new financial arrangement with the company. NBC has a 32 percent stake in Paxson, and the new deal would give the company perhaps more stock in Paxson in 18 months. NBC acquired an option to purchase all of Mr. Paxson's common shares, including his voting control shares.

"It's a very complex deal--14 pages of legal documents," said Hal Vogel, president of Vogel Capital Management. "But it clears away some of the underbrush. Paxson was headed toward bankruptcy. NBC was looking to save their investment."

NBC initially had a $500 million investment in Paxson, which ballooned to $800 million, said Vogel. "NBC didn't have a choice. This gets them out of litigation with Paxson." As part of the agreement, NBC Universal and Paxson Communications settled all legal disputes.

NBC believes the deal will free up Paxson to find other business partners for the network--possibly to buy up NBC stake, according to analysts. Paxson could walk away from the company in 18 months with perhaps $25 million, according to analysts.

Despite current moves, analysts said it is unlikely that NBC would look to be in the involved in Paxson for the long term. Apart from the new financial arrangements, Federal Communications Commission rules would probably prevent NBC from acquiring the broadcaster. Paxson owns some 60 mostly independent TV stations in mid- to small-size markets that were the affiliates of his "i" network, which was re-launched recently with mostly infomercial and other paid-programming.

Bruce Campbell, who currently is senior VP of business development, will replace Burgess at NBC Universal. Campbell will report to Randy Falco, president of NBC Universal Television Networks Group.

Bob Wright, Chairman and CEO of NBC Universal, said in a statement: "NBC Universal has been the largest financial investor in Paxson Communications for some time, and we continue to believe that Paxson Communications has a compelling national platform."