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Company Town : Turner Drops Plans to Buy King World : Television: Syndicator's share price drops $3. An offer for CBS could still be in the works, sources say.


The stock price of King World Productions Inc. tumbled $3 a share on Monday to $40 after Turner Broadcasting Systems Inc. stated that it would not pursue an acquisition of the syndicator of such shows as "The Oprah Winfrey Show" and "Wheel of Fortune."

The Atlanta-based company has been in negotiations for several months to buy King World for stock in hopes of using the $500 million in cash on its books to make a bid for CBS Inc. Though the King World deal seems dead, sources close to Turner said a competing offer for the third-ranked television network could still be in the works, financed through another means.

"The deal buster was Microsoft," said one executive close to the company.

With about $2.5 billion in debt on its own books, Turner has limited borrowing capacity. But Microsoft Corp. has been talking to Turner about investing as much as $2 billion in the entertainment company, which owns Cable News Network, the TBS superstation and Castle Rock Entertainment.

Microsoft has neither confirmed nor denied talks, despite media reports to the contrary last Friday. And three sources close to Turner said negotiations were still alive--one reason why Turner no longer needs to pursue King World as a means of financing a CBS bid.

One source characterized the discussions with Microsoft as "very fluid."

In exchange for its investment, Microsoft could gain access to services like CNN, the cartoon network, and Turner Classic Movies for its Microsoft Network on-line service hitting the market this month.

Turner called a special board meeting Monday afternoon to discuss several situations it is confronting, including mounting a CBS bid. After what one source defined as a "wide-ranging" one-hour telephone meeting, the company issued a statement saying it "is not ready to announce any plans at this time."

Wall Street sources said the company is "working out the final details" on an agreement to purchase the financially strapped Samuel Goldwyn Co. for a little more than $100 million. "It is not inconceivable that there could be an announcement this week," said one banking source, who indicated that the board had approved the purchase based on certain contingencies.

Goldwyn includes a library of 850 films and 700 television episodes, and 125 movie theaters.

But sources said the King World purchase had soured as the deal grew more expensive in recent weeks. Executives close to the company say Turner has had an offer on the table for several months to buy King World in a 2-for-1 stock swap. At the time, King World shares were trading in the $40-a share range. But Turner shares have since risen from the $20-a-share range, and closed Monday down slightly, at $22.125, valuing a deal at about $1.7 billion.

That price is high for a company whose fortunes are expected to decline severely after the year 2000. That is when its most lucrative contracts with ABC stations for "Jeopardy!" and "Wheel of Fortune" expire with little chance for renewal.

King World's other valuable asset, "The Oprah Winfrey Show," has suffered a sizable ratings reduction this year as viewers tuned in to the O.J. Simpson trials instead. And Oprah Winfrey has the right to bow out of her contract if King World's ownership changes.

Despite the $500 million on its books, King World will be lucky to generate $125 million a year in cash flow over the next five years, source said. A King World purchase would allow Turner to borrow only $1 billion--hardly enough to launch an attack against the $5.4-billion bid for CBS by Westinghouse Electric Corp.

Westinghouse, in fact, could be prepared to increase its bid to $6 billion in a bidding war, said one source close to the Pittsburgh-based industrial company.

That could make a rival bid expensive for Turner. CBS traded up slightly again today, closing up 50 cents at $81.375.

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