King's ransom: $3 bil in CBS stock
Brothers' roles at stake in merger
If consummated, the deal would give CBS a mountain of cash, estimated at about $800 million, as well as King World's hugely profitable syndication business, which is centered on "The Oprah Winfrey Show," "Jeopardy!" and "Wheel of Fortune."
While brothers Roger and Michael King, who own about 23% of the company, are believed to be talking with three or four potential buyers, including Fox Family Worldwide, negotiations with CBS are thought to be the most advanced. The Eye is said to have offered about $35 a share for the distrib, founded in the 1960s by the brothers' father, Charles King.
King World stock closed up $1 to $29.93 Friday, although it has risen from just below $25 in the past couple of weeks since word of the talks leaked out (Daily Variety, March 22). CBS and King World declined comment Friday.
CBS stock closed up 18¢ to $39.93 Friday. The deal would add tremendously to CBS' earnings, as the broadcaster's stock trades at a higher valuation level than King World's, Merrill Lynch analyst Jessica Reif Cohen said.
King World earns an annual net profit of about $200 million, almost as much as CBS is expected to earn itself in 1999. King World's money-minting talk and gameshow franchises are tied up for three or more years on rival stations, primarily the ABC O&O group, but the CBS-owned stations did sign on last year for King World's hit revival of the "Hollywood Squares" gameshow.
The big question is the future role of Roger and Michael King, KW's chairman and vice chairman, respectively. In fact, the distribution deals for the three shows that account for the vast majority of KW's annual revenue -- "Oprah," owned by Winfrey's Harpo Inc., and Sony's "Wheel" and "Jeopardy!" -- can be terminated if Roger King's role in the company changes significantly.
Observers believe the brothers want to stay involved in the company, although it was not clear Friday what role CBS CEO Mel Karmazin would offer them. As such, the post-merger responsibilities of the Kings may be one of the key negotiating points. Indeed, people close to the situation said that while a deal was very likely, it was not certain, given the Kings' propensity to change their minds.
The Kings have considered selling out several times over the past eight years, only to pull out at the last minute or see the buyer pull out. Turner Broadcasting, for instance, was about to finalize a deal when it was itself acquired by Time Warner, while New World Communication Group's plan to buy the company was upset when News Corp. bid for New World.
Observers say these deals highlighted the King brothers' willingness to sell, even while they periodically looked for acquisitions themselves. Over the years, King World has also looked at buying various companies, such as Paramount Pictures, MGM and Spelling Entertainment.
Over the past year, King World moved to broaden its scope by expanding into kidvid, network and telefilm production, inking a rich deal with Barbra Streisand's Barwood Films. It also plowed tens of millions into the launch of two new syndie strips, "Hollywood Squares" and "The Roseanne Show."
Last month the company retained former Universal Studios chairman Frank Biondi as a consultant on acquisitions. It's not clear what prompted the reversal in thinking, although King World had also retained investment banker Allen & Co. more than a year ago to advise on sale, merger and acquisition possibilities.
Observers note that King World may be more inclined to finalize a deal this time because its board now includes three strong-minded independent directors -- Intel exec Avram Miller, former Ticketmaster CEO Fred Rosen and Ray Chambers. Miller and Rosen were both appointed in the past year.
If a CBS-King World union is to occur, observers say it needs to be wrapped up soon. If the talks drag on without a resolution, chances are the deal will eventually fall apart.
