Viacom to Buy CBS TV Station in St. Louis : Deal Would Be Firm’s 4th Acquisition This Year

Viacom International pressed ahead with another acquisition Friday, agreeing to purchase a St. Louis television station from CBS for $122.5 million cash.

The deal marks the fourth purchase this year for Viacom, which has disclosed that it is considering two more acquisitions. Even though the four deals cost more than $700 million, officials of the entertainment and cable-TV company insisted Friday that the accompanying debt it has taken on is not designed to discourage takeover attempts.

The New York-based entertainment company has been the object of takeover speculation for several months, causing its stock to reach a 52-week high of $63.50 this week before a Chicago group of investors disclosed holdings of 11.69%.

The group, led by JMB Realty executives, perplexed Wall Street by saying Thursday that it had considered mounting a takeover bid but had changed its mind and will sell the stock or hold it as an investment. The price of Viacom’s shares dropped $6.125 on Thursday with that news.

‘Friendly’ Investment

On Friday, Viacom’s stock closed at $57.875, up 50 cents on a volume of 750,400 shares on the New York Stock Exchange.

JMB, one of the nation’s most successful real estate investment firms, has searched for a “friendly” cable-TV investment this year, apparently without success. The purchase of Viacom shares began last August, one financial source said. JMB escalated its stock purchases and considered seeking control because it questioned the wisdom of Viacom’s spending spree--in particular, its negotiations to buy 50% of MGM/UA Entertainment’s motion picture production business, according to two industry sources.

JMB concluded that it is not willing to mount a hostile takeover even though “it could (afford to) go the whole route without even relying on junk bonds,” one investment banker said. “This is the Bass (family) mold: Listen to the company (and be) willing to be holders.”

The banker’s view conflicts with Wall Street traders who concluded that JMB “bit off more than it could chew,” as one said.

According to an annual report, JMB is a closely held firm that manages properties valued at more than $1.3 billion. In Los Angeles, its holdings include two Century City buildings and the Cedars-Sinai medical office complex.

Even though JMB has said it won’t acquire more Viacom shares, some portfolio managers and analysts maintain that control of Viacom could still change hands. Since JMB’s plans for its Viacom shares are unknown, analyst Paul Kagan said the company’s future remains unsettled.

“I don’t think it’s settled . . . unless someone controls the stock like the Bass brothers with Disney.” Kagan noted that control of Walt Disney Productions was uncertain for a lengthy period last year until the wealthy Bass family of Fort Worth increased its stake to 25%.

Analysts said Viacom is paying a reasonable price for KMOX-TV in St. Louis, which CBS placed on the block six weeks ago. Sharon Armbrust, an analyst with Paul Kagan Associates in Carmel, said Viacom appears to be paying 10 times the station’s hoped-for 1986 cash flow.

The price is below that paid recently for some stations in major cities, but television revenue in the St. Louis market is believed to be growing more slowly than the national average.

With the St. Louis purchase, Viacom gains entry to its largest TV market to date. St. Louis is ranked 18th, while Viacom’s four other TV stations are located in the 23rd, 51st, 54th and 70th largest markets, respectively.

The sale leaves CBS with four TV stations in the top markets.

As previously reported, Viacom has bid for certain Westinghouse cable-TV properties, and it is considering buying a 50% stake of the MGM production studio, home video and film distribution arm. If both deals go through, Viacom may be obligated to pay up to $400 million for the cable properties and $250 million for its stake in MGM, sources said Friday.

Last month, Viacom closed a $510-million deal in the cable-TV programming industry, acquiring the 50% interest in Showtime/The Movie Channel not already owned by Viacom and about 66% of MTV Networks. Viacom has announced plans to offer about $184 million for the remaining MTV shares owned by the public.