Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 1, 1994 TAG: 9407010071
SECTION: BUSINESS PAGE: A13 EDITION: METRO
SOURCE: The New York Times
DATELINE: NEW YORK LENGTH: Medium
The merger being discussed would put Diller in charge of CBS as its chief executive, returning him to the business in which he initially built his reputation. Tisch would remain as chairman and head of the executive committee. Neither Tisch nor Diller could be reached for comment.
A merger would reflect the continuing blending of two industries, broadcasting and cable, that once were bitter rivals. CBS, which earned $326 million on revenue of $3.5 billion last year, owns and operates seven television stations and 21 radio stations, as well as the television network. QVC, which earned $59 million on revenue of $1.2 billion in the most recent fiscal year, operates two home shopping channels that sell consumer products such as jewelry, electronics and housewares, on programs that are transmitted by satellite and carried by cable TV systems.
For the 52-year-old Diller, who fought and lost an aggressive and ambitious battle to gain control of Paramount Communications this year, acquiring management control of CBS would be a major coup. He built the Fox TV network at a time when a fourth network was considered unrealistic.
While he has attempted to expand QVC, it was always clear that he intended to run a larger and more mainstream business. CBS, now the leading network in ratings, certainly fulfills that requirement, though it now pits his skills against those of the Fox network, the new power he created.
For his part, Tisch, who is 71, has repeatedly denied that he will sell CBS, saying that broadcasting is in his blood. The arrangement now being discussed would leave him with a major stake in the combined company, but allow him to walk off with a hefty profit, including roughly $528 million in cash. (He owns about 20 percent of CBS' stock, or three million of its 15.4 million shares; the current value of his shares is about $800 million.)
Still, the deal comes as CBS is seen as particularly vulnerable. It has recently lost affiliates to Rupert Murdoch's News Corp., the parent company of the Fox network. The timing of the talks prompted one media executive to conclude that Tisch might be discouraged by the looming challenges to the network.
The merger would be a friendly one, but as a practical matter, a pending deal opens CBS to bids by third parties. In the case of Paramount's merger with Viacom, for example, what started as a friendly merger between those two companies turned into a hotly contested bidding war between Viacom and QVC.
Though precise terms of the deal being discussed were not known on Wednesday, several people close to the discussions said that all CBS shareholders would receive $175 a share in cash as well as shares of voting stock in the new company. Shareholders in QVC Network would receive only stock in the new company - a combination of voting and nonvoting shares. If the deal is completed, CBS shareholders would own 51 percent of the merged entity, and QVC shareholders would own the balance.
Tisch would retain ownership of 10 percent of the net entity, which would keep the CBS name. Diller would own 5 percent of the company's voting stock, as would both the Comcast Corp. and Tele-Communications Inc., two big cable companies that are large QVC investors.
People involved in the negotiations cautioned that the talks had fallen apart at least once already, several weeks ago, and that there was no guarantee that a final agreement would be reached. If it is, however, it would be subject to board approval and a shareholder vote, as well as approval by the Federal Communications Commission.
CBS shares closed on Wednesday at $263, up $4. QVC shares closed at $32.375, down 37.5 cents.
by CNB