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Biz Briefs

Feb 23, 2004  •  Post A Comment

As a staring contest takes shape between cable operator Comcast and The Walt Disney Co. over a possible merger, Wall Street analysts said the cable company could prove a formidable opponent to Disney, since each company has a long list of reasons why it should hold out until the other blinks.
Indeed, people close to Comcast point out that Disney’s rejection last week of the cable company’s $54.1 billion offer rings familiar to Comcast management, which was rebuffed in the summer of 2001 after it made a bid for cable systems owned by AT&T Broadband, only to snag the systems later.
Further, the longer Comcast waits, the more likely Disney’s stock, which shot up immediately following Comcast’s announcement that it had made a hostile takeover bid for the media giant, will return to pre-announcement levels. So far, that has been the case: Disney shares late last week were trading at a slightly more than 12 percent premium over pre-announcement prices, down from an 18 percent premium the day after Comcast’s offer was made public.
As for Disney, holding out better positions the company to come up with a plan that could fend off Comcast. The company hired attorney Martin Lipton, the creator of the corporate so-called poison pill defense, and is said to be examining options that could make it tough for Comcast to swoop in. A long shot would be a “white knight” emerging with a rival bid. However, many of the names bandied about either have officially said they’re not interested or are seen as unlikely to step up with an offer. Officials at Disney and Comcast declined to comment.
Stations Wary of Comcast-Disney Merger
Station group executives are casting a wary eye at the proposed merger of ABC parent Walt Disney Co. and Comcast, fearing the marriage would put affiliates at a disadvantage in negotiations while at the same raising hope that regulatory approval would provide relief from rules limiting duopolies.
ABC affiliates’ biggest fear about the proposed $54 billion merger is that the deal would result in a cable operator-broadcast’s chief rival-having significant leverage over affiliate issues.
Chief among the issues: The potential for Comcast to exact “onerous” affiliation agreements on ABC stations and the possibility of Comcast bypassing affiliates that don’t sign those agreements. Other worries include the potential for Comcast to eliminate any chance affiliates might have to get retransmission consent compensation for their signals on Comcast systems and to deny carriage of affiliates’ digital multicast signals.
Then there’s the issue of ABC’s continued weak performance. “I am not sure Comcast owning ABC gives me more comfort,” said an executive at an ABC affiliate group.
Comcast declined to comment.
Meanwhile, some station groups believed they could get relief on the rules limiting station groups’ ability to own more than one station in a market if the merger gets approved.
Earnings Roundup
MGM reported a 3 percent increase in fourth-quarter profit to $60.2 million, or 25 cents a share, compared with a year-earlier profit of $58.7 million, or 24 cents a share. Revenue dropped 13 percent to $543.1 million, as film and television revenue declined in the quarter. For the year, the company posted a widened loss of $161.7 million, or 66 cents a share, from red ink of $142.2 million, or 57 cents a share, a year ago.
Television station company Young Broadcasting last week reported a widened fourth-quarter loss of $13.2 million, or 67 cents a share, compared with year-ago red-ink of $582,000, or 3 cents a share, on a 17 percent decline in revenue to $55.1 million, as the 11-station group posted gains in local and national advertising revenue, helping to offset declines in political advertising. For the year, the New York-based owner of KRON-TV in San Francisco reported a full-year loss of $49.1 million, or $2.48 a share, compared with year-ago red ink of $66.5 million, or $3.48 a share. Revenue slipped 8 percent to $207.7 million.
World Wrestling Entertainment said last week that it swung to a fiscal third-quarter profit despite posting a decline in revenue for the period, attributable to fewer live events, declining attendance and lower advertising revenue. Stamford, Conn.-based WWE recorded a profit for the three months ended Jan. 23 of $8.9 million vs. a year-ago loss of $16 million, or 23 cents a share. Revenue sank 15 percent to $79.1 million.
Doug Halonen contributed to this report.