Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, November 28, 1995 TAG: 9511280201
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE: BLOOMBERG BUSINESS NEWS
DATELINE: NEW YORK LENGTH: Long
In a second move related to Diller's TV ambitions, Silver King Communications Inc. said it agreed to buy Savoy Pictures Entertainment Inc., a television and movie producer that also owns four television stations.
The two moves would help the former Fox TV chief achieve his long-held goal of running a major network. Control of Home Shopping gives Diller money to buy programming for the television retailer, while adding Savoy would provide more viewers through its four TV stations.
``Diller has done wonders in the past, and I expect him to do his magic on Silver King as well,'' said Charles McQuaid, a portfolio manager at Wanger Asset Management, Silver King's largest shareholder with 841,500 shares as of June.
Diller's rising prominence at both companies is part of a master plan by John Malone, president of Denver-based cable TV giant Tele-Communications Inc., whose company will be a major Silver King shareholder. Silver King relies on Home Shopping programming; with Diller at the helm, Malone is betting that the programming will improve.
Diller received an option to buy 15 million shares, or 17 percent of St. Petersburg, Fla.-based Home Shopping's shares outstanding, for $127.5 million.
Home Shopping shares closed Monday up 25 cents per share at $9.75, putting the price Diller would pay at $20 million less than the value of the shares. Trading in Silver King, also based in St. Petersburg, and Savoy Pictures was halted.
Home Shopping operates a warehouse and order-fulfillment center in Salem. The most recent figures available place employment there at about 450; no one at the facility would confirm the number. Calls to the company's headquarters were not immediately returned.
The Salem facility, which handles Home Shopping's jewelry and apparel orders, is one of three such distribution centers nationwide. The other two, in Waterloo, Iowa, and Clearwater, Fla., handle hard goods and problem orders. A fourth center, in Reno, Nev., was closed early this year.
Lindsey Quisenberry, a broker with J.C. Bradford & Co. in Roanoke, said it's too early to know what the change in leadership might mean for Home Shopping's operations in Salem.
But he added that he would be surprised to see the local distribution center lose business or employees, because the factors that brought Home Shopping to the Roanoke Valley - skilled labor and low costs - haven't changed.
As part of the plan announced Monday, Liberty Media Corp., a Tele-Communications unit, said it agreed to swap its 80 percent of Home Shopping shares to Silver King. In exchange, Liberty Media would receive Silver King shares, raising its stake to close to half from 20 percent, the two companies said.
The swap will make Home Shopping a subsidiary of Silver King, with which Diller hopes to launch a network. Diller owns 20 percent of Silver King and was named its chairman in August. Tele-Communications would be placing its bets on the parent company, Silver King.
Analysts were skeptical that Diller will be able to build his tiny network into an equal to Fox or CBS.
``Silver King is not one of your biggies,'' said Dennis McAlpine, an analyst at Josepthal, Lyon & Ross.
Jessica Reif, a Merrill Lynch analyst, said long-term contracts with Fox will prevent the stations from broadcasting Diller's programming in prime time.
She expects Diller to sell those stations to Fox parent company News Corp. when limits on station ownership are eliminated under the communications bill being discussed in Congress.
Diller also will have the sales battle of the year improving matters at Home Shopping.
The retailer, which reaches 65 million homes and sells everything from computers to kitchen knives, has lost money in the last three quarters and barely eked out a profit in each quarter of 1994. Quarterly revenue fell to $240 million in the third quarter from a four-year high of $302 million.
For the third quarter, Home Shopping posted a loss of $17.7 million, equal to 20 cents a share.
Diller is willing to try to turn things around because cash from Home Shopping could be used to buy programs for his station group. They only broadcast Home Shopping shows now, although Diller intends to create a new format, which he hasn't disclosed.
Silver King's stations reach 27.5 million people in cities including New York, Los Angeles and Chicago, the company said. The number of viewers who can receive that signal clearly is most likely much lower than that, analysts said.
Diller is hoping to buy stations from New York-based Savoy, adding four high-powered stations to Silver King's 12 UHF stations.
Meanwhile, Diller has to find cable systems willing to carry Home Shopping as Silver King stations gradually broadcast other material.
Diller and Silver King could not be reached for comment.
Staff writer Megan Schnabel contributed to this story.
by CNB