Why does Walt Disney Co and its $19,000m winning the hand of Capital Cities/ABC Inc rate front page treatment in Computergram when this is the first mention of the Westinghouse Electric Co deal to acquire CBS Inc, which has been cooking in public for a week or three and was finally announced late on Tuesday? We’re clearly sleeping on the job, some might say – but the reason is simply that Walt Disney Co is an excellent company with many of its multimedia and new technology ducks already in a row – the deal to create an entertainment studio for three of the Baby Bells’ planned on-line interactive systems for example, and Capital Cities/ABC is a pretty imaginative company for an owner of a major US television network. Westinghouse on the other hand, is one of the great American dinosaurs, a vast company which, like IBM Corp, has done almost nothing right for the past decade, has regularly reported figures close to break even on either side of the profit and loss line except where there were big write-offs to be taken, and its biggest claim to fame in recent years is probably that when it bought Unimation Inc just over a decade ago, it pretty much owned the US robotics industry – and then simply ran it into the ground. It is a company whose counterparts in Japan are vast (and now very profitable) in semiconductors, new media recording technologies, computer peripherals and software, that has not invested in developing anything remotely new or challenging in the past decade, and is not really noted for anything much – power stations may be fairly profitable, but they are not exactly a leading edge high-growth area. As for CBS Inc, it has been a desperately weak company ever since it sold the big record company to Sony Corp, and was over-ripe for takeover. So Westinghouse buying CBS sees two weaklings that have had no hot new ideas for decades, deciding they’d be safer sheltering together in face of the gathering multimedia storm.
Limping follower
Under the agreed deal, Westinghouse will pay $81 cash a share, $5,400m in all, for CBS. The agreement is subject to the completion of financing. Chemical Bank and J P Morgan have each committed to lend $1,000m and have agreed to arrange the remainder of the financing. Westinghouse has five television stations – in Philadelphia, Boston, San Francisco, Pittsburgh and Baltimore, and its acquisition of CBS will produce a combined television group reaching about 33% of the US, exceeding Federal regulatory limits, but despite radio being a big part of Westinghouse, the post-acquisition radio reach does meet regulations. Westinghouse said this year it would slash more jobs to cut costs and continue selling non-core businesses. To win financing it reportedly agreed to sell between $1,000m and $1,500m assets within two years. It is hard to see a Westinghouse-CBS combination becoming anything other than a limping follower in the multimedia revolution, and if the bid is not challenged by someone else offering more for CBS now, it is likely that there will be a break-up bid for the enlarged Westinghouse within a couple of years, which would see all the radio, television and any other media interests retained and the defence, power generation and other electrical businesses sold. What of the other network, General Electric Co Inc’s National Broadcasting Corp, NBC? What we have been saying, since the start of the year when there was speculation, is that our objective is not to sell NBC, but to maintain majority control and seek alliances that would strenghten and grow NBC it says.
