Donald Trump Tells MCA of Plan to Buy Up Stock

MCA, the giant entertainment company that has enjoyed the longest continuous management in Hollywood’s history, disclosed Friday that New York real estate magnate Donald Trump has put the company on notice that he might buy as much as 24.9% of MCA’s shares.

The price of MCA stock leaped $5.25 a share on the news, and some prominent Wall Street analysts immediately predicted that Trump’s action would trigger a chain of events leading to the sale or possible breakup of the company. MCA assets include Universal Studios with its tour and amphitheater, a major record company, publishing and broadcasting operations, a toy company and 50% of a large movie theater chain.

No analysts or industry sources interpreted Trump’s move as friendly. But outwardly, at least, MCA reacted calmly, calling no summit meeting of its top executives for the holiday weekend. The Universal City-based company shored up its anti-takeover defenses last summer and has a borrowing capacity with its banks exceeding $1.7 billion.

MCA Chairman Lew R. Wasserman has long vowed that he would never pay “greenmail”--or a premium over the market price--to rid the company of an unwanted investor. On Friday, Wasserman was unavailable for comment, but MCA President and Chief Operating Officer Sidney J. Sheinberg said, “If he said it in 1984, I assure you he means that in 1988.”

Wasserman was said to be at his weekend house in Palm Springs, while the company’s longtime investment banker and company director, Felix G. Rohatyn of Lazard Freres & Co., was reportedly in Paris.

Sheinberg, reached at his weekend home in Malibu, declined to discuss the Trump move other than to say that MCA disclosed the development within hours of Trump’s notification to the company.

According to MCA’s terse announcement, Trump said he has filed with federal antitrust agencies in order to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which requires companies contemplating mergers of a certain size to notify the Justice Department or Federal Trade Commission at least 30 days before closing a deal. Until Trump clears the regulatory hurdle, he would appear to be barred from acquiring more MCA shares.

While some entertainment and investment community sources immediately predicted that Trump seeks MCA’s substantial real estate holdings in Southern California and Florida, others expressed skepticism about the sincerity of Trump’s interest. Citing other instances when Trump has helped drive up the price of a stock before selling, one analyst said he found “general skepticism among the arbs,” alluding to the arbitragers, or traders who speculate in takeover stocks.

Holdings Appear Small

Indeed, Trump’s current holdings in MCA stock would appear small. According to MCA, the New York entrepreneur owns 375,000 shares, or less than 1% of the company’s 73 million shares outstanding. At last week’s prices, Trump’s investment would appear to be slightly less than $15 million.

By contrast, the 74-year-old Wasserman owns about 7% of the company and wields some control over an additional 8%. He has served as the company’s chief executive for 42 years--an unprecedented term for Hollywood, if not most American corporations.

Until last summer, Wasserman’s stature in business and political circles and his MCA stock holdings appeared sufficient to ward off unsolicited bids. But a three-week hospitalization triggered rumors of ill health and wild speculation in the stock last July. The company’s lackluster performance in its motion picture business has hurt morale within the company and prompted criticism anew on Wall Street.

‘A Substantial Gap’

“The time is ripe for a change,” declared Alan Kassan, an analyst at Shearson Lehman Hutton Inc. “MCA is rich in quality assets, and the company has not been able to translate them into earnings because of (disappointments) in the theatrical business. . . . There’s a substantial gap between the stock price and the value of the assets.”

By Kassan’s estimate, MCA shares could be worth as much as $65 to $68 apiece. On Friday, the company’s stock closed at $45, up $5.25 in composite trading on the New York Stock Exchange.

“Trump could help develop the real estate,” Kassan said. “I think he’ll end up with the real estate. I don’t think he’ll wind up with the whole company.”

Trump “is serious,” in the view of David Londoner, an analyst with the brokerage firm Wertheim & Co. in New York. “Clearly this is not a friendly (move). It pressures Wasserman and Sheinberg even harder to find a deal. I don’t think it’s greenmail. I think he’s put the company in play” as a takeover candidate, the analyst said.

Business Folk Hero

Trump, once known only as a builder of designer-label buildings--Manhattan’s Trump Tower and Trump Plaza encompass some of the city’s most expensive condominiums--has become something of a business folk hero lately. He has been glorified on magazine covers and in his own best-selling autobiography and is recognized as a plunger in the takeover market. He has parlayed large stakes in such companies as Holiday Corp. and Golden Nugget into multimillion-dollar profits, bailing out after word of his own interest helps send the price flying.

In only two cases did his interest mature into substantial continuing ownership of the target: Alexander’s, a New York department store chain, and Resorts International. Alexander’s was strictly a real-estate play for Trump, who coveted the chain’s parcels in mid-town Manhattan and in the retail district of outlying boroughs. He and Interstate Properties, a second large owner of Alexander’s stock, made a takeover bid last year but abandoned it in September. At year-end, however, both still owned about 20% each of Alexander’s stock.

Interest in Casino Firm

Trump’s interest in Resorts grew out of the big casino company’s inability to finance completion of its so-called Taj Mahal. This $900-million-plus building was designed to be the largest casino-hotel in Atlantic City, N.J., where Trump already owns two casinos.

After months of stock accumulation and sparring with Resorts Management, Trump early this month reached agreement to buy up all outstanding stock, take the company private and finance completion of the vast casino.

Staff writer Michael A. Hiltzik contributed to this story.