Matsushita’s Israel Boycott May Cloud Bid for MCA

Matsushita Electric Industrial Co.’s participation in an Arab-led boycott of Israel could complicate its efforts to purchase MCA Inc., whose chairman, Lew R. Wasserman, is one of Hollywood’s leading supporters of Jewish and Israeli causes.

Matsushita’s policy, which has not been widely publicized, bars the Japanese electronics giant from conducting any direct trade with Israel. That policy would technically prevent Matsushita from selling MCA’s movies and television shows to Israel. But U.S. law forbids American companies, even those owned by foreign firms, to comply with the boycott.

Executives from both MCA and Matsushita declined to comment on the policy. One individual familiar with the talks said MCA won’t change its policy of dealing with Israel even if acquired by Matsushita, but neither does it plan to end the talks because of Matsushita’s stance. Other individuals said Matsushita executives, queried about the boycott, have shown no willingness to end their participation in the boycott.

Leading Jewish activists, however, said that unless the sanctions are lifted, Wasserman will be quietly pressured to get out of the deal, which could be worth more than $8 billion.

“We’re talking about a mega-deal,” said Jess Hordes, Washington director of B’nai B’rith’s Anti-Defamation League. “It would not be inappropriate for Mr. Wasserman or any corporate executive to explore the implications of the boycott. We’ll try to alert him to the possible problems that could be created linking up with a company with this kind of policy.”

Jewish activists said Matsushita, based in Osaka, has been a loyal adherent of the Arab boycott, which also prohibits the electronics firm from opening stores or production facilities in Israel. Failure to follow the restrictions, in effect since 1951, can result in economic reprisals.

Other companies around the world also participate in the boycott, which is designed to weaken Israel’s economy. But Jewish leaders say the Japanese are particularly cooperative, presumably because of their country’s heavy reliance on oil from Arab nations. Toyota, Nissan, Hitachi, Minolta and Olympus are among the other major Japanese firms that honor the boycott, according to Jewish organizations, such as the B’nai B’rith Anti-Defamation League and the American Jewish Congress, that monitor a list maintained by the Israeli government.

The Matsushita name was little known to the American public until the company began discussing a bid to buy Los Angeles-based MCA, which owns Universal Studios, theme parks, real estate, record labels and other interests. Matsushita, whose products are sold under the Panasonic, Technics and JVC labels, reported profits of $1.6 billion on sales of $44 billion last fiscal year.

Will Maslow, special counsel to the American Jewish Congress and editor of the group’s monthly Boycott Report, said Matsushita’s Panasonic products are widely available in Israel but only through third-party American distributors.

Other Japanese companies have more boldly sidestepped the boycott. Honda sells cars in Israel through its American division. Sony Corp., which purchased Columbia Pictures Entertainment Corp. for $3.4 billion last year, sells its products directly out of a store in Tel Aviv.

Japanese-Israeli relations have gradually improved in recent years. The two countries agreed to explore possible economic and technological collaboration late last year after then-Israeli Foreign Minister Moshe Arens made a rare five-day visit to Japan. But the boycott issue remains as a sore point, especially among Jewish activists living in the United States.

Maslow’s Washington-based Boycott Report regularly monitors changes in policy. Several Jewish organizations in Los Angeles have also recently organized around the boycott issue. A position paper from the groups names Japan as “the worst offender” of any industrialized nation. Members have been encouraged to engage in an anti-boycott letter-writing campaign.

American companies have been barred from participating in the boycott since 1977 under the federal Export-Import Act of that year. “(Violators) are subject to, I believe, both criminal and civil penalties. . . . That’s fairly straightforward,” UCLA international law professor Arthur Rosett said of the U.S. anti-boycott rules. The United States is Israel’s biggest international trading partner.

Jewish leaders may be hesitant to directly challenge Wasserman, however. At 77, the MCA chairman is a revered figure in the Jewish and Israeli communities. One Jewish leader in Southern California said Wasserman is a significant contributor to such causes as the United Jewish Fund, an umbrella humanitarian organization, and Operation Exodus, which helps Russian Jews emigrate to Israel.

MCA President Sidney J. Sheinberg is also a substantial contributor to Jewish causes, as is Creative Artists Agency Chairman Michael Ovitz, who has served as Matsushita’s representative in its talks with MCA. Those ties have led to some discomfort in Hollywood as word of Matsushita’s Israeli sanctions have leaked out. But thus far it is difficult to determine what impact the revelation will have on the purchase discussions.

Both Sheinberg and Ovitz declined to comment.

Some Jewish leaders said it is quite possible that Wasserman, Sheinberg and Ovitz knew nothing of the anti-Israeli policy when they entered into the discussions. MCA now appears prepared to take the position that the boycott won’t affect the acquisition talks.

Privately, the current company line is that the studio won’t stop doing business with Israel even if acquired by Matsushita, but neither will it kill a deal over the parent company’s stance.

“Their corporate politics at Matsushita won’t have any effect on MCA’s politics,” one individual familiar with the talks predicted.

One longtime Wasserman friend, informed of Matsushita’s boycott, predicted that the deal is more likely to be jeopardized by Japanese sensitivity to renewed attention to the boycott than by any reaction at MCA. “It’s the Japanese company that may say, ‘Who needs this?’ . . . They are very sensitive to the way they’re perceived in the U.S.”

MCA has continued to enforce a blackout on the talks. The company’s top officers had been scheduled to meet Matsushita executives in New York last Sunday. But several individuals close to the company speculated that face-to-face meetings had been shifted to Los Angeles and might be under way already with Matsushita representatives, if not its president, Akio Tanii.

MCA stock fell $2.75 a share Tuesday to close at $56.125 as 567,900 shares changed hands in New York Stock Exchange trading. Analysts said the decline reflected a weak market and a lack of information about MCA’s talks with Matsushita.

“I think it’s (professional speculators) getting nervous about a lack of information flow,” said Lisbeth Barron, an entertainment analyst with S. G. Warburg Group in New York.

Whatever the course of the discussions, however, it is apparent that Matsushita’s boycott policy will now be among the items on the table. Rabbi Laura Geller of the American Jewish Congress in Los Angeles said it’s a legitimate issue for MCA.

“People would love MCA to use this opportunity to perhaps raise questions about these larger issues,” Geller said.

“Groups like ours continue to remind Japanese business that there should be no barriers to free and open trade between nations, and we will continue to do so until all such barriers disappear,” said Neil Sandberg of the American Jewish Committee’s Pacific Rim Institute. “The point will be raised that (Matsushita) should freely and openly trade with Israel.”