CBS Backs Away From Group’s Bid for Records Unit
Directors of CBS have declined a $1.25-billion bid for its records unit from an investor group headed by CBS Records President Walter F. Yetnikoff and also including Triangle Industries, a diversified New York manufacturer, sources said Wednesday.
Laurence A. Tisch, acting CBS chief executive, seemed ready to accept the offer earlier this week, then put the bid on hold pending Wednesday’s regular meeting of the board.
Tisch brought the proposal before the directors, who are believed to have decided that the records unit should not be sold at this time. “They decided that if somebody was willing to pay that much for it, then it was an asset with more future than past,” one source said, asking not to be identified.
Some board members are thought to have concluded that the very profitable records unit was a “core” business of CBS and its sale might make the company more vulnerable to a hostile takeover.
Tax Angle Cited
Such a purchase would have been the largest in record industry history, far outstripping the pending Bertelsmann AG purchase of RCA Records, which analysts estimated at its announcement in September to be worth $275 million to $375 million.
Sources said the investor group had planned to pay cash, then refinance the deal by issuing high-risk “junk” bonds with the help of New York-based Drexel Burnham Lambert, which is Triangle’s investment banker.
Sources said the proposal will die if it is not reconsidered soon because it would not be feasible without tax benefits that will be eliminated when the federal tax revision comes into effect in January. “This deal is already really reaching; a delay until next year would put it totally out of the question,” one source said.
The company made no formal announcement after the regular monthly meeting of its directors. A CBS spokesman declined to say whether the bid had been discussed or to give other details of the session.
CBS officials have continued to insist that the records unit, like CBS’ publishing division, is not for sale. But Tisch has indicated that he would at least listen to offers.
CBS had also received an inquiry about the records division from Walt Disney Co., according to sources. But Disney withdrew when it learned of the steep price that Tisch required before consideration of a sale, the sources said.
Officials of Drexel and Disney declined to comment. Yetnikoff and Nelson Peltz, chief executive of Triangle, could not be reached for comment.
New York-based Triangle is a major supplier of glass and metal containers and also makes copper wire and cable and steel conduit for the construction industry. In 1985, it had sales of $1.65 million.
The proposed price for CBS Records is considered steep, even given the division’s current high profitability. Industry sources suggested that the investor group had planned to impose deep cost cuts at CBS Records, which is the nation’s largest record company and has ballooned in size during recent years.
Sources noted that even in the first nine months of this year, when the records unit enjoyed booming growth, its gross profit margin came to 5.6% of sales. By comparison, Warner Communications’ record division finished last year with a gross operating margin of 11.7%.
Times staff writer Kathryn Harris, in Los Angeles, contributed to this story.