$3-Billion Bid for Columbia by Sony Reported : Studio Would Be First to Be Sold to Japanese

The board of directors of Columbia Pictures Entertainment met late into the night Monday to consider what industry sources said was a $3-billion cash takeover offer from Sony Corp.

A sale of the 64-year-old movie and television studio to Sony would mark the first acquisition of a major Hollywood studio by a Japanese concern and the third sale of a leading U.S. movie maker this year.

Neither party to the deal would confirm the bidder’s identity. Columbia, which has talked to Sony for more than a year and is 49% owned by Coca-Cola Co., said in a statement that it was “engaged in discussions” with a company that had offered cash for all of its shares.

Board Reviews Discussions

Columbia said its board would meet here Monday night to “review the status of discussions.” It provided no other details.

But one person familiar with the talks, who asked to remain unidentified, said that Sony and Columbia were “pretty close” to a deal valued near Columbia’s target price of about $27 a share. Industry sources speculated that a deal could be announced as early as today, after a vote by the Coca-Cola board.

Columbia Pictures Entertainment owns the Columbia Pictures and Tri-Star Pictures studios, television programming and syndication operations and the 820-screen Loews Theatre chain. The company’s valuable film library contains 2,700 movies--including the classics “On the Waterfront,” “It Happened One Night” and “Lawrence of Arabia”--and 23,000 episodes of television programming in 260 series.

The value of studios has skyrocketed in recent years as corporations here and abroad have sought filmed entertainment for use in newly deregulated TV world markets and new TV distribution technologies, such as VCRs, cable and satellites.

Already this year, the Warner Bros. studio was sold when parent Warner Communications was purchased by Time Inc. MGM/UA has reached an agreement to be purchased by Qintex Group of Australia.

After Monday’s announcement, Columbia Pictures Entertainment stock jumped $5.25 a share to $26.375 in composite New York Stock Exchange trading, setting a new high for the year. It was by far the most active NYSE stock, with 6.2 million shares trading hands.

News of the negotiations drove up the stocks of other movie and TV companies as well, including MCA Inc., Orion Pictures, Paramount Communications and Viacom Inc.

“This is one more signal that the vertical integration and the globalization of the industry is continuing apace,” said Gordon Crawford, senior vice president of Capital Research of Los Angeles, a money management firm and a major Columbia shareholder.

Sony, the maker of music and video products, has prowled Hollywood looking for a studio for some time. The company is believed to have considered buying MCA and MGM/UA as well as Columbia.

Price Called High

Analysts said a $3-billion price would be high for the studio, particularly in the light of its recent meager profits. “These are wild multiples we’re talking about,” said Lisbeth Barron, analyst with McKinley Allsopp Securities in New York.

The company’s stock was trading at only about $12 at the beginning of this year, before it was ignited by takeover speculation and some expectations of improved earnings.

A key force behind the deal is believed to be investment banker Herbert A. Allen, who is a member of the Columbia and Coca-Cola boards and an investor in Columbia since 1973. Coca-Cola executives and Allen, who heads Allen & Co. of New York, let it be known that they would consider a sale of the firm if an acceptable price could be reached.

Also said to be playing an important role in the sale negotiations was Walter Yetnikoff, who heads Sony’s CBS Records unit and has in the past stated his own interest in movie making.

A sale of Columbia would end Coca-Cola’s tempestuous experiment in the entertainment industry. The soft drink company bought Columbia in 1982 “with all sorts of grand pronouncements about the glories of Hollywood,” said Harold Vogel, analyst with the Merrill Lynch brokerage firm. But “they soon discovered that making it in the film industry wasn’t the same as winning shelf space in the grocery stores,” Vogel said.

Columbia Pictures repeatedly reorganized and changed managements. Among others, the movie studio was run by David Begelman, Francis (Fay) Vincent, Frank Price and David Puttnam, the iconoclastic British director who was replaced with current studio boss Dawn Steel last year.

Coca-Cola spun off 51% of Columbia in 1987 in a deal that combined the movie unit with Coca-Cola’s other entertainment properties and Tri-Star. Still, because of the rising asset values that the studios represent, “overall, Coca-Cola came out ahead with Columbia,” Vogel said.

Still unknown is whether a new owner would replace the current management, which includes chief executive Victor Kaufman and movie chief Steel. (Columbia Chairman Donald R. Keough has remained president and chief operating officer of Coca-Cola.)

In its 1988 purchase of CBS Records, Sony showed that it was willing to let a current management remain in place and continue to run operations with an apparently free hand.

“Whether they feel this management has been successful enough to deserve that treatment remains to be seen,” one analyst said.

For the first eight months of the year, Columbia Pictures held a 14% share of the movie market, ranking it fourth among the studios after Warner Bros., Walt Disney Co. and Paramount. The studio has this year released such films as “Ghostbusters II,” “When Harry Met Sally” and “Karate Kid III.”

In addition to the price of the stock, the buyer would presumably assume debts of about $1.4 billion. Columbia, which has 110.8 million shares, last year earned $8.6 million on revenues of $1.6 billion.

Times staff writer Michael Cieply in Los Angeles contributed to this story.

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