GE/NBC, News Corp., Turner Broadcasting, King World, Spelling and Dreamworks all have been put into play as hunters or targets following the Disney/ABC and Westinghouse/CBS deals.
Most are heavily owned by mutual funds, money managers and pension funds.
"The next deal like these ones that have occurred will almost assuredly involve programming. I suspect News Corp. will spend a significant amount of money, maybe in excess of $1 billion, in either buying a company or creating" one, predicts Timothy Pettee, an entertainment and media analyst at Alliance Capital Management Corp. in New York.
Alliance is largely owned by Equitable Cos. Inc., which owns 13.5 million shares of The Walt Disney Co. As almost everyone in the world knows, Disney last week announced it is purchasing Capital Cities/ABC Inc. in a deal valued at $19 billion.
Mr. Pettee reckons News Corp., the first television network/media conglomerate, could go shopping for programming companies such King World Productions; Spelling Entertainment Group Inc., 77% owned by Viacom Inc.; or even Dreamworks, set up last year by former Disney executive Jeffrey Katzenberg, along with David Geffen and Steven Spielberg.
Jim Gribell is co-portfolio manager of the Boston-based David L. Babson & Co. Inc.'s $260 million growth fund. He agrees King World is a likely acquisition target for television companies looking for programs to fill air time. The company distributes several shows.
King World also is an attractive target because the company is sitting on a huge cash hoard of about $10 to $12 per share, and a pristine balance sheet, he said.
Ted Turner's Turner Broadcasting Systems Inc. was rumored to be kicking the tires at King World some time ago, just the kind of deal Mr. Gribell expects to see.
It would be "the exact opposite of the Disney (deal) - a distribution company buying production capabilities to fill its channels," said Mr. Gribell. Babson owns 400,000 shares or just more than 1% of King World.
Endless deal possibilities
Meanwhile, other investors mention a dizzying array of possible deals, involving Turner, General Electric Co.'s NBC network and Time-Warner Inc.
"The logic that will push deals is a lack of critical mass, and a lack of vertical integration," observed Lawrence Haverty, senior vice president at State Street Research & Management Co., Boston. State Street Research has large holdings in several media and entertainment companies. Turner lacks that critical mass, he noted.
And a network that lacks production facilities is NBC. A GE acquisition of Time-Warner, as incredible as it might seem, no longer seems impossible.
Mr. Haverty suggests Time-Warner's two largest shareholders - The Seagram Co. Ltd., and Capital Research & Management Co. - "are not happy campers," and might want to sell out. Seagram and Capital Research together own about 25% of Time-Warner's outstanding shares.
State Street Research owns almost 1.4 million shares of Time-Warner; he believes the stock is undervalued. It also owns more than $50 million worth of Capital Cities stock.
Other analysts suggest Time-Warner would be a willing suitor for NBC - if GE is willing to sell it. Despite the approximately $19 billion in debt on its books, Time-Warner is a cash cow, projected to throw off $3.2 billion in cash flows this year, so an acquisition is not impossible.
And Time-Warner could easily overcome regulatory problem by divesting its cable franchises or spinning them off to shareholders, Mr. Pettee said.
Another dream combination
A deal between Time-Warner and NBC "would be a second dream combination," like Disney/ABC, Mr. Pettee said. Warner Brothers is the top moviemaker and TV studio.
Meanwhile, Turner Broadcasting, widely rumored to have been interested in NBC in the past, now is popping up as a potential bidder for CBS. The deal would be a joint bid with King World, or Liberty Media, a Tele-Communications Inc. subsidiary that already owns more than 20% of Turner.
Another possibility is Turner buys King World, using its cash hoard for part of the purchase and then its cash flow to pay down the debt.
Then again, Turner could sell itself - with News Corp. as a possible acquirer, said Arden Armstrong, portfolio manager at Miller Anderson & Sherrerd, West Conshohocken, Pa. The firm owns 836,000 shares of Cap Cities and 87,000 shares of News Corp. It has bought and sold Disney shares several times in recent years.
Turner has seven cable channels, including CNN, TBS and TNT. It's also the fifth largest movie producer. "If (Ted Turner) can't buy ABC, which he could never afford, can't buy CBS, and NBC is not for sale, he could just sell his company," Ms. Armstrong said.
She said Turner would be a good fit with Rupert Murdoch's News Corp., owner of Fox Broadcasting Co. Mr. Murdoch is interested in gaining a bigger foothold in cable TV distribution.
Bonanza for investors
Meanwhile, the list of potential winners from this merger blitz includes dozens of mutual fund companies and pension funds. Warren Buffett, the famous chief executive of Berkshire Hathaway Inc., Omaha, Neb., collects a huge windfall. He was the matchmaker in the Disney-Cap Cities/ABC deal. His company also is Cap Cities' biggest shareholder, with about 13% of the shares.
Cap Cities' second largest shareholder is State Farm Mutual Automobile Insurance Co., Bloomington, Ill., which owns 9.4 million shares or just less than 6%. Other large investors are Provident Investment Counsel, Pasadena, Calif., which owned 4.7 million shares, and Capital Research, which owned approximately 4 million shares at the end of the first quarter, according to securities filings.
Another big winner is Melvin Tukman, a money manager in San Francisco. Although his $2.3 billion portfolio only holds 16 stocks, three are the major networks. Tukman, one of several managers of the $9.6 billion Vanguard/Windsor II fund, is the seventh largest shareholder of Capital Cities/ABC, the fourth largest holder of CBS and a shareholder in GE, NBC's parent.
At Time-Warner, big shareholders include: Bankers Trust New York Corp., which owned 7.2 million shares at the end of March; Equitable, 6.1 million shares; and Wells Fargo Institutional, 7.1 million shares.
And if Turner sells out, Capital Research, with nearly 9 million shares, and Sun Trust Banks Inc., with more than 3 million shares, would be among the biggest winners. The California Public Employees' Retirement System, Sacramento, owns approximately 316,000 shares, and the College Retirement Equities Fund, New York, 516,000 shares.
King World investors include Chancellor Capital Management Inc., which holds 2.5 million shares of the company; Mellon Bank Corp., 2.2 million shares; and the New York State Teachers' Retirement System, 868,000.
Institutional investors in Spelling include Capital Guardian Trust Co. and Capital Research, both subsidiaries of The Capital Group Inc., which together own about 3.3 million shares; Fidelity Management & Research Co., about 1.3 million shares; and Mellon, about 700,000 shares.
