Hearst's Bid For H-A Complicated By Rising Share Price

Hearst-Argyle's shares hit $26 Monday for the first time since Hearst Corp. announced in late August it would make an offer to take the station group private. The high comes after Hearst Corp. made the offer to pay $23.50 a share official on Friday--raising the possibility that some shareholders will continue to balk at the proposal and try to persuade Hearst Corp. to increase its offer.

There are eight class-action suits seeking to derail the merger--and one institutional shareholder, with 90,000 shares, has urged the H-A board to reject the offer.

Hearst-Argyle's board, which is controlled by Hearst Corp., owner of the majority of the company, has said it will recommend whether shareholders should accept the offer within 10 business days after one was made. In a filing Friday, Hearst Corp. said the offer would be good until Oct. 12, although it could be extended.

Some shareholders may continue to resist, given the climbing share price. But Hearst Corp. said in its SEC filing Friday that it is looking to acquire as many shares as it can as a "first step" in gaining total control of H-A.

Hearst Corp. is seeking 90% of outstanding shares in order to execute the privatization. The company already owns about 74%.

The largest institutional shareholder is Florida firm Private Capital Management, with some 10 million shares.

Shareholders who have filed the class action suits allege that Hearst Corp. is trying to take advantage of a market downturn to buy out shareholders at a below-market price, then deprive them of the opportunity to participate in the company's future growth from political revenues next year, among other benefits.

H-A manages 29 TV stations (eight in top-25 markets) and holds a stake in Internet Broadcasting, which develops Web sites for local TV.

"The competitive demands of the TV broadcasting industry and changes in the broader media industry, when balanced against the pressures on a public company to deliver short-term results, have convinced us that private ownership of Hearst-Argyle is desirable and will assist Hearst-Argyle in attaining its strategic and business objectives," wrote Hearst Corp. CEO Victor Ganzi in a letter to the H-A board as the offer was made.

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