THE merger and acquisition mania of the late 1980s is back in at least one industry as entertainment companies scramble to transform themselves into broad-based global media and information companies.
The new wave of mergers - involving the cumulative transfer of billions of dollars in assets - is changing the face of the entertainment industry. Some analysts say that mergers of smaller- to medium-sized production companies can be expected in the months ahead, as firms rush to gain a competitive edge.
Last week Viacom Inc. proposed an $8-billion takeover of Paramount Communications Inc. And Spelling Entertainment Group Inc. announced a merger with Republic Pictures Corporation in a transaction valued at more than $100 million. Late last month News Corporation Ltd., controlled by media mogul Rupert Murdoch, purchased Star TV, Asia's leading satellite TV network. News Corporation is currently seeking to acquire Television Broadcasts Ltd. (TVB), the largest television outlet in Hong Kong.
In recent months several other takeovers or mergers have taken place. Walt Disney Company purchased the Miramax Film Corporation. Turner Broadcasting System (including Cable News Network) acquired New Line Cinema Company and Castle Rock Entertainment. The three acquisitions have a combined value of more than $600 million. Over the weekend, Ted Turner expressed an interest in buying Paramount.
BUT if Viacom's takeover of Paramount is finalized, it will be the largest multimedia merger in the United States in dollar terms. The combined company will rival other global media entities like Time Warner, Bertelsmann of Germany, and Sony of Japan. Viacom, controlled by Boston lawyer and investor Sumner Redstone, owns cable TV networks (MTV, Nickelodeon, Showtime, and the Movie Channel), as well as several local cable delivery systems around the country.
Paramount, meanwhile, owns film studio Paramount Pictures, as well as the New York Knicks, the New York Rangers, Madison Square Garden, a cable sports network, half of the USA cable network, and two book publishing firms, Prentice Hall and Simon & Schuster, among other enterprises. The Spelling and Republic merger was promoted by Blockbuster Entertainment, the largest video store company in the US. Among the major Hollywood film studios, three - Columbia, Tri Star, and Universal - are now owned by Japanese firms. Twentieth Century Fox is owned by News Corporation, an Australian company. Warner is now part of a US-based multimedia conglomerate, Time Warner. The Walt Disney Company (which releases films through its Disney, Touchstone, and Hollywood film divisions) is the only remaining major independent film company in the US. But even Disney has not escaped the new round of merger mania: This summer Disney announced the acquisition of Miramax Film Corporation.
The film/entertainment sector is widely considered a lucrative industry by Wall Street. Mark Manson, an analyst with Donaldson, Lufkin & Jenrette Inc., sees the industry as ``favorable'' in terms of investment potential, with five films so far earning more than $100 million each in the US market this summer.
But it is the continued expansion of cable television and electronic information networks in the US and abroad that is driving the merger game, experts say. Paramount is a ``model'' of the ``information media company of the next 20 years,'' says Rudolf Hokanson, an analyst with Kemper Securities Inc. Such multimedia companies will be able to produce, deliver, rent, lease, or transmit by cable or direct television signal an array of informational or entertainment materials from stock tables to films.
Mr. Murdoch's expansion into the Asian market is one example of the international potential and intense rivalry prompting the new wave of mergers. Star TV reaches more than 11 million households in Asia. But Time Warner is also hoping to become a major player in Asia, media analysts say. News Corporation and Time Warner are trying to follow suit.