The board of Columbia Pictures Entertainment voted early today to sell the movie and TV studio to Sony Corp. for $3.4 billion in cash, the first sale of a major Hollywood studio to a Japanese concern.
Sony immediately pledged that it will place the company in the hands of its U.S. subsidiary "and keep it as independent as possible, as a full-fledged member of the U.S. film industry." Sony is rumored to be considered installing producer Peter Guber, the 47-year co-chief executive of Guber-Peters Entertainment, as chief executive of Columbia.
Columbia's two top executives, President and Chief Executive Victor R. Kaufman and Chief Operating Officer Lewis Korman, will leave the company after the sale, Columbia said.
Columbia Pictures Entertainment includes the Columbia Pictures and Tri-Star studios, television programming and syndication operations, a huge film and TV library, and the 820-screen Loews movie theater chain. The 2,500-employee company has secretly talked with Sony intermittently for more than a year, and it announced Monday that negotiations were under way.
Coca-Cola Gives Option
Coca-Cola Co., Columbia's largest shareholder with a 49% stake, has given Sony an option to purchase those shares, Sony said. Coca-Cola's management has pledged that it will recommend the sale of Coca-Cola shares to its board at a meeting scheduled Oct. 2. The New York investment banking firm Allen & Co., which holds a 3% stake, has given Sony an option to buy its shares as well.
Sony will begin a tender offer for Columbia shares Oct. 2. The offer will run for 20 days.
The sale is part of a consolidation of the film industry that has come as increasing worldwide viewing of entertainment has driven up the studios' values. Already this year, the Warner Bros. studio has been sold to Time Inc. with its parent, Warner Communications, and MGM/UA Communications has agreed to be sold to Qintex Group of Australia.
Sony was willing to pay a lofty $27 a share for a company with meager earnings because of the strategic value of Columbia's film and TV "software" to a company with a strong hold on the emerging TV and audio technologies, analysts said.
The purchase of the studio "extends Sony's long-term strategy of building a total entertainment business around the synergy of audio and video hardware and software," said Michael Schulhof, vice chairman of Sony Corp. of America, in a prepared statement.
Several analysts said the high price makes it unlikely--though not impossible--that another bid will appear.
Sony had no immediate word on whether it foresees layoffs at Columbia, but some analysts said they do not expect major changes immediately. Traditional Japanese concern about maintaining employment "suggests it's unlikely they would come in and make dramatic changes," said Christopher Dixon, an entertainment industry analyst with Kidder, Peabody & Co. in New York. Also, "Sony is perplexed at some of the realities of the Hollywood community . . . so they would probably be unwilling to go in and rattle the cage." he said.