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CBS Says Records Group Options Still Under Study

October 02, 1987|Associated Press

NEW YORK — CBS Inc. said Thursday that it will further study the options for its records group, which has reportedly attracted a sizable purchase offer from Sony Corp.

CBS said its board, which met informally for three hours to discuss the matter, would consider it further at a regularly scheduled meeting Oct. 14.

Separately, CBS said it had completed the previously announced sale of its magazine group for $650 million in cash to a group led by the unit's senior management. The group will be known as Diamandis Communications Inc.

On Wall Street, CBS stock fell $5 a share to $220.75 in composite New York Stock Exchange trading after soaring $9.75 a share on Wednesday.

Worth $2 Billion

The broadcasting and entertainment giant has acknowledged that Sony has expressed interest in purchasing the records group, which has been quite profitable in recent years.

Analysts have speculated that CBS could get $2 billion or more for the unit and said CBS' failure to reject Sony's inquiries outright indicated that it might be seriously considering selling the group, one of its two core businesses.

"If they definitely didn't have an attractive offer, they would have said that," said John Reidy, who follows media stocks for the investment firm Drexel Burnham Lambert Inc.

"It sounds to me like they can't make up their mind," said Peter Appert, a media analyst for Cyrus J. Lawrence Inc. He said the board might not be unanimous about whether it should sell the records group.

Many Issues Weighed

Reidy said the pace CBS was setting on the matter might reflect the complexity of structuring such a large sale.

"There are many issues with respect to taxes in addition to price that could affect the sale," he said.

Speculation also has arisen that another bidder may have appeared.

The New York Times reported Thursday that rumors had circulated that Nelson Peltz, chairman of Triangle Industries Inc., or Stephen Swid, who agreed with two partners to buy the CBS music publishing division last November, might be interested in bidding for the records group.

A call was placed to Peltz at his New York offices, but it was not returned. Mark Rutman, who works for a public relations firm that represents the Swid group, said Swid had no comment on the rumors.

In its brief midday statement, CBS said it "is continuing to study several courses of action with respect to its records group designed to maximize the short- and long-term values of its shareholders.

"Further consideration by the CBS board is planned at its regular scheduled meeting on Oct. 14," the statement said.

The records division has been buoyed in recent months by hit records from artists such as Bruce Springsteen and Michael Jackson.

It had an operating profit of $162.1 million on revenue of $1.49 billion last year. That accounted for 37% of CBS' total operating profit and 31% of its revenue in 1986.

CBS acquired American Record Co. in 1938 and the records group that resulted is believed to be dear to the heart of CBS founder William Paley, who is now chairman of CBS.

But analysts say Laurence A. Tisch, CBS president and chief executive officer, would like to sell the group if the price was right because of the inherent volatility of the record business.

Sony reportedly offered $1.25 billion for the records group last year, but the board rejected the offer in December.

Since Tisch took over last fall, CBS has sold its magazine division as well as its book and music publishing businesses, which brought about $600 million.

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