With the collapse of the CBS-QVC merger, inquiring minds want to know where omnipresent cable TV mogul John C. Malone stands.
Comcast Corp. spoiled his plans with its surprise bid for QVC Inc., of which Malone's Liberty Media Corp. owns nearly 19%. Malone had been looking forward to owning a piece of CBS Inc., close sources agreed on Thursday. But it's unclear whether he will back any new bid for CBS or whether he might counter Comcast's bid for QVC with an offer of his own.
On the QVC issue, one knowledgeable source who was at investment banker Herbert Allen Jr.'s annual retreat for high-roller executives Thursday in Sun Valley, Ida., said: "There's a lot of speculation . . . that Malone may come in on the deal. It's clear that Comcast did not tell him."
But many others said they would be astounded if Malone bid for QVC, because he typically does not engage in bidding wars. They also pointed out that he could be challenged on antitrust grounds, as Liberty Media controls the rival Home Shopping Network. If Malone is saying he doesn't want to sell his QVC stake, sources said, it could indicate an effort to extract a higher cash price or to maneuver for a tax-free payment in stock.
Malone may yet find a way to pursue a CBS investment, but he'll have to do so in an indirect manner, because federal rules severely limit cross-ownership of cable TV systems and broadcast properties.
Meanwhile, few can picture QVC Chairman Barry Diller trying to outbid Comcast for QVC. Said one analyst: "It's a graceful way for Barry to make a little money and leave the company and go find something else to do. His heart wasn't in it."
The situation was very different a year ago. Wall Street was enthralled with Diller at the time, and Home Shopping Network and QVC were engaged in merger talks. Those talks were dropped in November, however, as QVC pursued an unsuccessful bid for Paramount Communications Inc. The Federal Trade Commission had asked for additional information about the antitrust consequences of the network merger, but the scope of the agency's concern is not known.
On Nov. 11, Liberty Media promised the FTC that it would withdraw from a voting trust that controlled QVC and give up its seats on the QVC board during the Paramount quest. After the Paramount bid failed, Liberty passed up the chance to rejoin the voting trust and Liberty representatives never rejoined the board. Observers concluded that Malone did not want to rile antitrust regulators.
"At the end of the day, the government won't let Malone own both QVC and HSN," one cable TV executive declared at the time.
Still, Malone's reputation for boldness is such that some Wall Street analysts think he could pull off a merger of the two shopping networks. "A lot of people thought that was a doable deal," insisted one who spoke on the condition of anonymity. "If there is an antitrust problem, he'd find a way around it anyway. He could do anything he wants. He's still Malone."
While the media world's movers and shakers eagerly await Diller's next move, he joined most of them Thursday at the Sun Valley Allen & Co. conference.
Diller has become the man of the hour at the four-day gathering, where executives split their time between provocative business discussions and bonding activities such as rafting. Some colleagues predicted that Diller would sit out this year's get-together after the QVC-CBS merger blew up in his face, but Diller honored his commitment to Allen, a close friend, to be there.
After Diller jetted in late Thursday, sources said, he was doing his best to deflect questions about his future. He had been scheduled to address the conference Saturday on QVC. The replacement speakers, ironically, are Viacom Chairman Sumner Redstone and President Frank Biondi, who beat Diller in the $10-billion Paramount battle.
The Allen & Co. conference is the premier event of its kind for entertainment executives because it brings them together with top fund managers and masters of other universes, such as billionaire investor Warren Buffett and Microsoft Chairman Bill Gates. It's also extremely secretive, in keeping with the 54-year-old Allen's well known penchant for privacy.
Allen's New York investment banking firm specializes in media and counts Diller and many other conference participants as clients. The timing of this year's event is especially good, because the deal-making environment has been energized by having CBS, QVC and Diller in play.
Said one power broker at the event: "They are certainly a center of conversation. But they're not \o7 the \f7 center, because there are so many heavyweights here."
The group includes News Corp. Chairman Rupert Murdoch and Capital Cities/ABC Chairman Thomas S. Murphy, who already have networks, and Walt Disney Co. Chairman Michael D. Eisner, who may or may not be in the market for one of his own. And then there are former combatants Redstone and TCI's Malone, who are reported to be patching things up.
Also in the mix are Creative Artists Agency Chairman Michael S. Ovitz, Blockbuster Entertainment Corp. Chairman H. Wayne Huizenga and Sony Corp. of America President Michael P. Schulhof.
And for extra spice there are everyone's favorite corporate dance partners, Time Warner Chairman Gerald R. Levin and Seagram Chairman Edgar Bronfman Jr.--who has yet to convince skeptics--Levin among them--that Seagram's 15% Time Warner stock purchase is friendly.