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CVN Agrees To Be Acquired By QVC in Video Shopping Deal

July 11, 1989

PLYMOUTH, Minn. (AP) _ CVN Companies Inc. has agreed to be acquired by the smaller QVC Network Inc. in a deal officials hope will make the companies more competitive against Home Shopping Network Inc. in the video shopping industry.

The agreement, valued at more than $400 million in cash and stock, is subject to approval by shareholders of both companies as well as federal regulatory approval, the companies said Monday.

″The combination of QVC and CVN will allow for more effective direct marketing efforts which will result in increased subscriber acceptance and satisfaction,″ CVN Chairman Theodore Deikel said in a statement. ″The combination will also enhance the opportunities for long-term growth.″

Joseph M. Segal, QVC’s chairman, said his company would still reach fewer homes with its CVN and QVC shopping programs than Home Shopping Network does.

But he said QVC would be able to compete more effectively and ″reach a sales level comparable to HSN’s″ if the deal goes through because the company would be able to offer consumers more diversified shopping programs and merchandise choices.

Tele-Communications Inc. of Englewood, Colo., CVN’s largest shareholder, made its own offer for CVN in November but withdrew the bid in January.

The video retailing industry generated an estimated $1.4 billion in revenue last year.

The merger agreement calls for QVC, of West Chester, Pa., to purchase all CVN common stock for $19 a share in cash plus one-eighth of a share in QVC common stock.

CVN, which operates the Cable Value Network, the Fashion Channel and America’s Shopping Channel, had about 18.3 million shares of stock outstanding, making that cash portion of the deal worth about $350 million.

The stock portion of the deal would add about $40 million to the price of the transaction at recent prices.

In national over-the-counter trading, CVN rose 75 cents a share to $19.25 on Monday while QVC fell 62 1/2 cents a share to $17.25.

CVN also has warrants and options outstanding that would add $25 million to the value of the deal, the companies indicated.

QVC, which operates the QVC cable network, has arranged for a financing commitment of $435 million from the Bank of New York. It has also received a commitment from Comcast Corp. to buy $30 million of convertible subordinated debentures.

QVC had net sales of $213 million in the year ended May 31, substantially smaller than CVN’s $637.8 million in the same period. However, QVC has an exclusive TV agreement to sell Sears, Roebuck merchandise.

CVN reported serving some 23.3 million cable subscribers to 14.1 million for QVC.

Home Shopping, which operates two shop from home networks, had $730.1 million in sales in its latest fiscal year ended Aug. 31, 1988.

The research firm Paul Kagan Associates Inc. of Carmel, Calif., estimated that Home Shopping’s two channels combine for 55.79 million full-time- equivalent subscribers, a figure adjusted to account for the fact that not all cable operators use the service 24 hours a day.

On the same basis, Kagan estimates that CVN is second in the industry with 21.04 million full-time-equivalent subscribers, and QVC third with 10.95 million.

CVN said its board decided that the QVC offer would benefit shareholders more than CVN’s previously announced plan to issue a special $10 a share dividend. If CVN shareholders approve the merger, the dividend will be canceled.

After the merger, QVC said it intends to continue both companies’ television shopping programs.

QVC said it does not intend to make any substantial changes in CVN operations before the end of the year to allow time for teams from both companies to evaluate ways to enhance productivity.

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