Finance History | ABC, 77 West 66th Street, 3 January 1986 — US$517.5 Million Helped Finance a Broadcast Merger

On 3 January 1986, Capital Cities completed its acquisition of American Broadcasting Companies, creating Capital Cities/ABC and concluding a US$3.5 billion merger in 1986 dollars that Berkshire Hathaway had helped finance. Berkshire purchased 3 million newly issued Capital Cities/ABC shares at US$172.50 per share in 1986 dollars, a total commitment of US$517.5 million. The price had been fixed when Berkshire committed to the investment in early March 1985, months before the transaction cleared approvals and reached closing. The capital served two purposes at once. It supplied funds for the larger company's acquisition while giving Berkshire a substantial minority ownership position in the combined broadcaster and publisher. Berkshire did not seek operating control. Under an unusual agreement, the company's chief executive could vote Berkshire's shares for an extended period, and Berkshire accepted restrictions on selling its block to a large holder without management approval. Those limits reduced Berkshire's flexibility and could constrain its ability to capture a premium for a large block. In return, they promoted stable ownership around managers Berkshire trusted to integrate a much larger business. The structure therefore differed from both a passive market purchase and a takeover. Berkshire supplied permanent equity, acquired participation in future results and deliberately left voting authority and day-to-day decisions with Capital Cities leadership. The purchase was not presented as a bargain. Berkshire's 1985 account said the shares were bought at a full price amid strong valuations for media properties, making management quality and long-term operating performance central to the expected return. That performance still depended on advertising demand, programming costs, affiliate relationships, regulation and the difficult work of combining television, radio and publishing assets. ABC's complex at 77 West 66th Street anchors the financing to the broadcast network being acquired. The Manhattan site represents a US$517.5 million equity commitment in 1986 dollars that traded liquidity and some shareholder freedom for scale, stable ownership and a long-duration claim on the merged company's economics. Photo: Jim.henderson, CC BY 4.0, via Wikimedia Commons.