Japan Electronics Giant in Talks to Buy MCA : Films: Deal for the studio could reach $7.5 billion if a takeover attempt by Matsushita is successful.

Hollywood’s MCA Inc. and Japan’s Matsushita Electric Industrial Co. said they are discussing an acquisition of MCA by the Osaka company in a deal valued as high as $7.5 billion.

The buyout would put a second major film studio in the hands of a Japanese parent and might pave the way for the retirement of Lew R. Wasserman, MCA’s 77-year-old chairman and chief executive.

Individuals close to the talks said Matsushita, a consumer electronics giant, would pay between $80 and $90 for each of MCA’s approximately 83.8 million shares outstanding. News of the talks, which were reported in Tuesday’s Wall Street Journal, sent MCA’s depressed stock up $19.50, to close at $54, as 3.71 million shares changed hands in New York Stock Exchange trading.

MCA stock stopped far short of the presumed offering price and fell somewhat late in the day, indicating Wall Street skepticism that a long-rumored purchase of the entertainment conglomerate, which owns Universal Studios, was finally at hand. “I’d put the chances at 50-50,” said a top officer of one rival media concern.

Matsushita’s American depositary receipts, which also trade on the exchange, closed at $122, up $2.

In an unusual twist, Matsushita is being advised in the proposed transaction by Creative Artists Agency, a powerful Hollywood talent agency. Individuals familiar with the talks said that Michael Ovitz, CAA’s chairman and principal owner, hopes to play a role in running MCA but that the studio’s current managers would remain in place, perhaps for years. One individual said MCA’s managers would have their positions guaranteed for five years.

“Management stays in place. That’s the essence of the deal. . . . Look, Michael’s wired into Matsushita, and conceivably there would be a place for him in the future,” another individual said.

Ovitz returned recently from Japan but could not be reached for comment. A spokesman said only that CAA, and not Ovitz personally, was advising Matsushita “like any other client.”

The agent advised Sony Corp. in its $3.5-billion purchase of Columbia Pictures Entertainment last year, and he discussed taking charge of that studio before talks with Sony officers broke down and Hollywood producers Peter Guber and Jon Peters were hired instead.

In a brief statement, MCA officers said they were talking with “a major international company regarding a possible negotiated acquisition of MCA. The discussions are continuing on a friendly basis. No agreement has been reached. There is no assurance that an agreement will be reached.”

Both Wasserman and MCA President Sidney J. Sheinberg, reached at the company’s Universal City headquarters, declined to comment.

In Japan, Matsushita officials appeared to soft-pedal news of the talks. “It’s true that all kinds of proposals have been brought to us regarding (mergers and acquisitions) of U.S. movie companies. There have been some feelers from MCA. But they are no more than one of these talks,” Matsushita President Akio Tanii told Nihon Kezei Shimbun, a Japanese financial journal.

MCA is being represented in the talks by investment banker Felix Rohatyn of Lazard Freres & Co., a source said. Matsushita apparently has relied exclusively on Ovitz.

David Londoner, an analyst with the New York investment firm Wertheim Schroeder, said: “I think there’s a strong chance (the deal) will go through. That’s the first time I’ve been able to say that about an MCA story.” MCA has discussed possible combinations with Sony, RCA Corp., Walt Disney Co. and others in the past.

One individual familiar with the discussions said he believed an acquisition would close within 30 days unless an American giant stepped in with a better offer. “The only possibility I could conceive of changing this, is if GE would step in,” the individual said.

General Electric Co. owns the NBC television network and is said to be interested in a studio acquisition, but only if the “financial interest and syndication” rules of the federal government were loosened enough to permit an easy fit with a company such as MCA. As a major producer of television programs, MCA presumably could not be matched up with a network owner unless the rules are changed.

Richard Cotten, senior vice president and general counsel of NBC, argued that an MCA buyout by Matsushita would make a change in the rules more urgent, regardless of any acquisition plans by GE. Rep. Edward J. Markey (D-Mass.), chairman of the House telecommunications and finance subcommittee, was highly critical of the possible deal. “When Matsushita melds its vast hardware empire (of consumer electronics) with MCA’s huge video software library, it will be in a position to dominate the global communications marketplace and squeeze American companies out of key markets. . . . The Japanese and the Europeans are in the seventh inning of the global technology game, and the U.S. is arguing over how to get to the ballpark,” Markey said.

MCA takes in annual revenue of approximately $3.5 billion from its film, TV, theme park, book, real estate, record and other businesses. The company would presumably sell its New York area TV station, WWOR, in a Matsushita buyout, because foreign corporations are not permitted to control U.S. broadcast stations.

MCA’s film division has enjoyed a renaissance with hits such as “Parenthood” and “Sea of Love,” but the company’s profits have been hurt by an investment in money-losing Cineplex Odeon Corp., and problems at the new Universal Studios tour in Florida. MCA’s stock, perennially among the strongest entertainment issues, has been trading at a 52-week low, as have other major entertainment stocks.

A major voice in any buyout decision at MCA will clearly be David Geffen, who sold his private record label to the company earlier this year for 1 million shares of a specially issued preferred stock. Geffen’s stock can be converted into 10 million common shares, making him MCA’s second-biggest shareholder with about 12% of the company, but only under tightly controlled conditions.

Geffen could not be reached for comment, but one Geffen friend said the mogul appeared to favor the transaction.

Wasserman, a longtime talent agent who represented former President Ronald Reagan during his acting career, helped build MCA with the company’s founder, the late Jules Stein. Wasserman controls about 13.4% of the company directly and through various trusts, and apparently believes that a major purchase of MCA would expand its growth opportunities while putting an end to persistent takeover pressures.

Matsushita, with about $44 billion in annual sales, was repeatedly rumored during the past year to have been searching for an entertainment acquisition to complement its vast manufacturing operations. It has a small Hollywood presence through an investment by its 51%-owned subsidiary, Victor Co. of Japan, in Largo Entertainment, an independent film company.

The MCA acquisition would fit a historical pattern under which Matsushita, with its Panasonic and other brand names, consistently has let Sony break new ground with technology and then followed with a major investment.

Both companies clearly believe that for their hardware businesses to prosper, they should be matched with the sources of programming best provided by American giants such as MCA, Disney or Paramount Communications Inc.

Some observers close to Sony believe that Matsushita may find it difficult to close the deal because financial conditions in Japan and American receptivity to foreign investment have deteriorated over the last year. “My people believe this is not going to happen,” one of Sony’s American associates said of the MCA-Matsushita deal.

Financing would not appear to be a major concern for Matsushita, which has roughly twice Sony’s sales, about $25 billion in cash and marketable securities, and few debts.

An individual close to MCA said access to Matsushita’s vast financial resources are a principal attraction for the Hollywood company. “I think Lew believes the resources of this $44-billion-a-year company are needed for MCA to grow. It has very, very deep pockets, and the Japanese do not interfere,” the individual said.

Times staff writers John Lippman in Los Angeles and Leslie Helm in Tokyo contributed to this story.

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