Diller eyes October as PFE stays in play
USA topper mulling u-turn into film industry
The USA Networks chairman first started talking to Edgar Bronfman Jr., CEO of U parent Seagram Co., late last year about buying into either PFE or U (Daily Variety, Dec. 21, 1998).
It's unclear when, or precisely why, October was thrown into the mix. Some sources speculated that Seagram may have added the indie film company as a sweetener to Diller, who is said to value its brand name, as well as that of PFE's indie distrib Gramercy. Talks on October are still exploratory and have yet to reach a formal stage.
The sale of October would upset many within Universal Pictures, as it would fuel the belief that Seagram is looking to downscale its presence in the film business. U first invested in October almost two years ago, when it paid $14 million for a 51% stake.
It would also mark a U-turn for Diller, whose suspicion of the film industry is well known. But people close to Diller say he is willing to invest in film if the financial exposure and risk is limited and there is potential for some franchise value. This could be the case with October.
However, price remains a contentious issue. One source indicated that Seagram has already rejected several of Diller's offers.
Minority's veto right
Diller also has to win over October's minority shareholders, who have a veto right over any deal, although it shouldn't be too much of a problem as they are led by his longtime investment banker Herbert Allen.
People close to Diller said he does not want to spend a lot of money on film, and October would be a tiny acquisition. U isn't a full owner, though it has an option to buy the remaining 49% over five years at a price dependent on performance. And October's performance since U's 51% purchase has not been spectacular. Apart from the Robert Duvall starrer "The Apostle," October has had no breakout hits, suggesting its price has not risen appreciably.
While October's library is not that big, it has gained some new value from the numerous production deals and relationships that it has signed in the past year, including ones with Sean Penn, Jonathan Demme, Harvey Keitel and Michael Douglas.
Interest bearing
Buying what's left of PFE would likely be more expensive for Diller than buying October, but it isn't clear how interested he is in PFE, or which pieces of it he is eyeing. Some observers think Diller only wants Gramercy and possibly some of the production labels, which include Propaganda Films, Working Title and Scott Free Prods.
Carlton Communications is still believed to be the likely buyer of PFE's ITC television library (Metro-Goldwyn-Mayer completed its $235 million acquisition of the PFE film library Thursday).
Neither Seagram nor USA would comment. Also declining comment were October co-presidents Scott Greenstein, Bingham Ray and John Schmidt, and most of October's minority shareholders, including Allen & Co. and investment firm Siegler, Collery & Co.
Observers believe Universal Pics president Chris McGurk, who is overseeing the integration of PFE into U and who has overseen October for the studio, would likely oppose any sale of October to USA.
On the other hand, U execs may be happy if Bronfman sells U's stake in October as long as it keeps Gramercy. According to some commentators, Gramercy is closer than October to U's idea of a specialized film company.
