CBS Inc. announced Wednesday that its board of directors made no decision about whether to sell CBS Records Group to Sony Corp., which has offered a reported $2 billion for the division.
The company said it is "continuing to explore alternate ways to maximize the short- and long-term shareholder values in its records operations."
According to sources, CBS President and Chief Executive Laurence A. Tisch has been in favor of unloading the record operation, while CBS founder and Chairman William S. Paley has argued for holding onto it. However, sources say Tisch found the estimated $600-million tax consequences of a $2-billion sale daunting.
Industry experts speculated that, after several months of disagreement, the board is now leaning toward a compromise of sorts--rejecting Sony's offer and spinning off at least part of the record division to CBS shareholders. In that way, CBS would retain control of the record company while reaping some cash benefits and setting a firm market value for the division, which the company expects to be more than $2 billion.
By announcing no decision on the sale after a 2 1/2-hour board meeting, "they could also be trying to get Sony to up the bid again," one record company president said. The next regular CBS board meeting is scheduled for Nov. 11, although interim meetings can be called at any time.
A financial statement released by CBS on Wednesday showed that the record division accounted for $42.4 million of the company's $93.1 million in pretax operating income for the third quarter. That's the best third-quarter result in the unit's 50-year history, the company said.
Overall, CBS reported that it earned $59.9 million on $984 million in revenue for the third quarter, compared to earnings of $28.6 million on $925 million in revenue for the same period of 1986. The company also said the $650-million sale of its magazine division was completed Oct. 1, which will result in an after-tax gain of about $177 million for the fourth quarter.
In commenting on the financial results, Tisch said the record division, "in particular, provided an outstanding quarter and enhanced its position as the No. 1 recorded music company in the world."
CBS Records Group reported operating profits of $162 million last year, an all-time industry high. With new albums by superstars Michael Jackson and Bruce Springsteen currently in the stores simultaneously, the company is expected to do even better this year, with some industry analysts predicting profits of more than $200 million.
In composite trading on the New York Stock Exchange, CBS stock fell $7.25 a share Wednesday to close at $211 on a day when the overall market was sharply lower.