NEW YORK -- Financial News Network Inc. said Tuesday it had signed a definitive agreement to sell its cable news business to rival CNBC for $105 million in a deal immediately challenged by Dow Jones & Co.
CNBC is owned by NBC, the television network.
Dow Jones, another bidder for FNN, said it was 'extremely disturbed' by the agreement and was going to 'pursue vigorously' its acquisition of the cable business news service. The news and information company owns the Wall Street Journal, Barron's and a chain of newspapers, among other properties.
'FNN's board of directors received an offer and a contract signed by CNBC to acquire certain assets of the FNN media business for $105 million in cash,' FNN said.
The move, which underscored NBC's aggressive strategy in the cable sector, came only two weeks after FNN announced it had 'agreed in principle' to be bought by a joint venture formed by Westinghouse Broadcasting Co. and Dow Jones & Co.
FNN, which is 47 percent-owned by Infotechnology Inc., said its board and its co-chief executives, Alan Hirschfield and Allan Tessler, believed CNBC's offer 'best served the interests of FNN, its creditors and its shareholders.'
Tessler told reporters CNBC submitted its offer to FNN Monday and gave the cable network until 11 p.m. EST that evening to reject the proposal or enter a binding agreement. FNN would have to pay CNBC $5 million if it intended to pull out of the deal.
'It was a substantially better deal for FNN and the board had the authority to sign the agreement,' Tessler said, adding that the agreement with CNBC was sealed without informing Dow Jones or Westinghouse of the signing.
FNN now is at the center of a heated legal and corporate battle for control of the cable network, which could result in its disappearance.
'We object in the strongest possible terms that our request to meet with you last night to review this matter was denied,' Peter Skinner, Dow Jones senior vice president, said in a letter to the FNN board.
'This is far from over,' said Donald Mitzner, president for Group W Satellite Communications, the Westinghouse subsidiary involved in the joint venture with Dow Jones.
CNBC issued a statement saying FNN 'will be integrated with CNBC.'
'We'll take the best of the two services and combine this into a premier cable network,' said Joe Rutledge, CNBC vice president for corporate communications. 'Where there were two services, there will be one.'
FNN and CNBC are rival business cable networks. FNN reaches more than 35 million homes in the United States and Canada. CNBC reaches 18 million homes.
Tessler said lawyers for both cable networks were confident the deal would not violate any antitrust laws.
'There is no antitrust problem,' Tessler said. 'We have quite carefully studied this with our counsel... Our contract also provides that there will be an antitrust review.'
Rutledge stressed that similar mergers recently have taken place in the cable industry without raising questions about antitrust violations.
Tessler could not predict how the sale would affect FNN employees whom he praised for having maintained quality programming under stressful circumstances. Rutledge said it was too early to project staffing levels at the new combined cable service.
CNBC also said Cablevision Systems Corp., which owns 49.5 percent of CNBC, will sell its stake to NBC once the FNN deal is final. Cablevision is not part of the FNN deal.
Tessler said CNBC's $105 million offer was less than FNN's liabilities, but he pointed out it was higher than the Dow Jones- Westinghouse bid of about $90 million.
He placed FNN's liabilities in the $145 million range, including about $55 million in bank debts, $83 million in lesser claims, $5 million in claims to trade creditors and about $3 million in administrative and related costs.
'FNN anticipates filing a petition for reorganization under Chapter 11 of the Federal Bankruptcy Code in the very near future,' Tessler said, adding that the sale could be final within 60 days.
Seeking protection from its creditors under Chapter 11 would allow FNN and its buyer to pay only part of its debt under the supervision of the bankruptcy court, which would have to approve the sale. This would leave room for a higher bid or a legal challenge.
Infotechnology's financial problems came to light last fall when the stock of FNN, used as collateral for its loans and liabilities, dropped sharply.
Tessler said an attempt by Security Pacific, FNN's main lending bank, to auction off 42 percent of FNN's stock held as collateral would fail 'for legal reasons.' He did not elaborate.
Infotech, which also owns 97 percent of United Press International, put all its properties up for sale in November.
Infotechnology recently announced it had agreed in principle to sell its interest in another cable network, the Learning Channel, to the Discovery Channel for $12.75 million.