THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, July 26, 1995 TAG: 9507260414
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: COLUMBIA, S.C. LENGTH: Medium: 62 lines
Multimedia Inc., which has been looking to boost its lagging stock price, made a smart deal with Gannett Co. Inc., which plans to buy the company for $1.7 billion, analysts said.
The bid Monday ends the Greenville-based company's five-month search for a new strategic direction.
John Morton, a newspaper analyst with Lynch, Jones & Ryan in New York, said the price was about as much as Multimedia could expect to get. Multimedia has strong cash flow, though Gannett, the nation's largest newspaper publisher, will be able to run the operations more cost-effectively, he said.
The consensus among analysts was that Gannett would sell off Multimedia's cable-TV operations, which are relatively small compared with the rest of the industry. Morton estimated they might fetch about $800 million.
Gerald Reilly, a newspaper broker in Connecticut, noted that Wall Street long has been dissatisfied with Multimedia's overall performance but has a high regard for Gannett and its ability to make the most of media assets.
But Reilly said he was concerned that such mergers can emphasize the bottom line over the integrity of individual papers and journalism.
Also wary of one news giant swallowing another is Marilyn Kern-Foxworth, a journalism professor at Texas A&M University.
Yet the buyout is nonetheless good news for Multimedia shareholders because Gannett has the visibility and the capital to help the properties prosper, she said.
Gannett will pay shareholders $45.25 for each of Multimedia's almost 38 million shares outstanding. It also will assume or retire Multimedia's debt.
Multimedia's profits were down 10 percent last year to $90 million, on $630.5 million in revenue.
For the first six months of this year, profits fell 2 percent to $36 million, partly because of the costs of launching a 24-hour cable television service called NewsTalk Television. However, broadcasting, newspaper and cable revenues have been up.
Analysts have said Multimedia has good assets, but they are undervalued, partly because of management turmoil, rising newsprint prices and regulatory pressures in the cable industry.
The company is most widely known through its syndicated talk shows, such as ``Donahue,'' ``Sally Jessy Raphael'' and ``Rush Limbaugh: The Television Show.''
Multimedia also owns five network-affiliated TV stations in Cleveland; St. Louis; Cincinnati; Knoxville, Tenn.; and Macon, Ga., and two radio stations, also in Macon. It publishes 11 daily and 49 nondaily newspapers and has cable television franchises serving more than 450,000 subscribers in five states.
Its Multimedia Security Service monitors more than 76,000 security alarm subscribers.
Multimedia was formed with the 1968 merger of the Greenville News-Piedmont Co. and Southeastern Broadcasting Corp.
In 1985, however, a $1.2 billion recapitalization to fight off a takeover bid by Washington Redskins owner Jack Kent Cooke left Multimedia with $110 million in annual interest payments and only three times that in revenues. by CNB