In merger negotiations


June 30, 1994|By Los Angeles Times

LOS ANGELES -- CBS Inc. Chief Executive Laurence A. Tisch and QVC Inc. Chairman Barry Diller are negotiating to combine their companies in a deal valued at roughly $2 billion, sources close to the talks said yesterday.

Under the terms being discussed, CBS would acquire the smaller QVC in a stock swap that would follow a cash payout to CBS shareholders. Mr. Diller would assume control of the combined company, with the 71-year-old Mr. Tisch agreeing to retire upon completion of the merger.

The deal would create an entertainment/home shopping conglomerate with strong ties to the cable TV industry and the emerging information superhighway -- and take some investor pressure off of both companies. The deal also is the latest in a series of on-again, off-again merger discussions in the media world, including the failed effort to join phone giant Bell Atlantic and cable giant Tele-Communications Inc.

The CBS-QVC negotiations, under way for several weeks, are described as "very serious."

While CBS has been the prime time ratings champ for the past three years, Mr. Tisch has come under fire recently for allowing National Football League broadcasts to slip away to the Fox network, and for subsequently losing eight key affiliates to Fox.

Mr. Diller has been under pressure to make a transforming deal for QVC since earlier this year, when he lost a $10 billion battle with Viacom Inc. for control of Paramount Communications. Neither he nor Mr. Tisch were available for comment yesterday.

Explaining the terms of the proposed deal, one source said CBS will likely refinance itself in order to pay its shareholders a large cash dividend prior to the contemplated acquisition of QVC. Such a move by CBS would effectively shrink the broadcasting company and bolster the ratio of QVC shares in a stock swap. Although CBS would still be the acquiring company, it would be a merger of near-equals. CBS has over $1 billion in cash and very little long-term debt.

Although rumors of a sale of CBS have circulated regularly since Mr. Tisch became chairman in 1986, he has repeatedly insisted that the network was not on the block.

Mr. Diller has coveted a TV network since he left the chairmanship of Fox three years ago. A former chief of both the Fox and Paramount studios, Mr. Diller wants to use the highly profitable QVC to fashion a media/entertainment colossus.

Mr. Tisch has privately said he would never sell CBS to Mr. Diller. The two temperamental executives have never been close.

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