Rumors Fly on Wall Street About Multimedia Mergers
Companies such as Disney explore new ventures, possible mergers
`ENTERTAINMENT' was the name of the game for Wall Street this week, as major multimedia companies explored new ventures and possible mergers. The result could be hundreds of millions of dollars in new outlays and increased revenues. The companies involved: The Walt Disney Company, Twentieth Century Fox, Viacom Inc., and Time Warner Inc.
The trend is not expected to be short-term. Rumors about impending deals - or possible deals - are rife. Some longtime industry experts say there could be one or more multibillion-dollar mergers later this year, involving several of the best-known entertainment companies in the United States.
This week alone, share prices of Time Warner, the nation's largest multimedia/entertainment company, shot up more than $3 on rumors that a takeover bid was imminent. Although speculation centered around such companies as Tele-Communications Inc., US West Inc., BellSouth Corporation, and Bell Atlantic Corporation, attention focused on the Seagram Company, the giant Canadian liquor distiller. Seagram has been slowly acquiring shares in Time Warner and now owns a 14.2 percent stake in the company.
In the meantime, Walt Disney announced it would start up a new cruise-line business by 1998. Disney is also starting to restore the New Amsterdam Theater on 42nd Street, which was the home to the Ziegfeld Follies in the 1920s. Tickets for Disney's new musical version of ``Beauty and the Beast,'' which recently opened at the Palace Theater here, are being quickly scooped up by parents eager to find a ``family'' show on Broadway.
Other new ventures: Viacom Inc., in the process of completing its purchase of Paramount Communications Inc., announced that it is exploring the possibility of selling Paramount's Madison Square Garden holdings. A buyer would get not only the Garden arena but the New York Knicks basketball team, the New York Rangers hockey team, and a cable television network. Paramount, meantime, announced a deal to boost its film production schedule. And Twentieth Century Fox announced it would begin producing animated films, with the first to be out by Christmas 1996.``All of this [activity] is more than coincidental,'' says Dennis McAlpine, a media/entertainment analyst with investment house Josepthal, Lyon & Ross Inc. ``Everyone is suddenly exploring new options [for their companies], new venues for linking up with the information superhighway of the future.''
Mr. McAlpine says Disney's prospective cruise line and Viacom's possible sale of Madison Square Garden properties make sense. Disney, he notes, had a lengthy contract with another cruise line, Premier Cruise Lines. But that venture ended several months ago. And in the case of Viacom, that company is saddled with $8 billion in debt resulting from the takeover of Paramount. Madison Square Garden is estimated to be worth $1 billion.
``Acquiring the cash from a sale would be more beneficial to Viacom right now than obtaining the cash flow'' from Knicks or Rangers games at the Garden, McAlpine says.
He says additional entertainment company mergers are likely in the months ahead. Blockbuster Entertainment could be looking for a good buy, he says. Another possible linkup is Capital Cities/ABC and Disney. A merger of those two giants would send shock waves throughout the entertainment industry.
Turner Broadcasting, which acquired new film holdings during the past year and has just added another cable channel, is also expected to do well in the months ahead. Sharon Williams, an analyst with Prudential Securities Inc., says Turner's stock price could post solid increases in the next 18 months, based on company fundamentals.
The big question, however, involves Time Warner. Is Seagram president Edgar Bronfman Jr., a longtime movie buff, really attempting to acquire control of Time Warner? McAlpine says it is not because the cost would be prohibitive. But some Wall Street analysts say Seagram may be planning a takeover.
Seagram, for example, has a $10 billion stake in DuPont that could be sold to help finance a Time Warner buyout.
Time Warner is a giant in both publishing and entertainment. Time magazine is the largest circulation news weekly in the US. And Warner has been the No. 1 studio in recent years, in terms of box office market share.