Diller's Silver King to Acquire Ailing Savoy : Deals: Separately, the media mogul agrees to take control of the Home Shopping Network.


Barry Diller's fledging Silver King Communications television company agreed Monday to buy ailing movie and TV company Savoy Pictures Entertainment for $210 million in stock, marking the end of a once-ambitious company that failed to compete with Hollywood's major studios.

The pending acquisition would give Diller four television stations in medium-size markets as well as about $100 million in cash that will assist him in his larger goal of using Silver King to try to build a new television network. Savoy's movie business--the heart of the company when it was founded in 1992--is winding down.

Diller, the former Paramount Pictures studio chief who built the Fox Television Network for media baron Rupert Murdoch and subsequently ran home shopping channel QVC, also announced Monday that he has agreed in a separate transaction to take control of the Home Shopping Network, where he was named chairman.

For Diller, the Savoy and Home Shopping Network deals are part of a plan to build a new type of television network, as he did when he launched Fox for Murdoch. As a first step in that direction, Diller in August bought Silver King, a group of 12 UHF television stations that air mainly home shopping programming.

Despite their weak signals, Diller hopes to supplement coverage in these 12 markets by relying on laws that require cable operators to carry the signals of local broadcasters. Silver King is believed to have an option to drop the home shopping programming within a year. He plans to replace the home shopping format of those stations with sports, news and entertainment programming. But he needs cash to do that.

Diller said in a phone interview from New York on Monday that home shopping and the broadcast stations are compatible businesses and that having them under the same umbrella will be useful. "Broadcast advertising and direct selling are going to be interchangeable," he said. "It is very easy to break up HSN programming into one-minute, two-minute or three-minute segments for broadcasters."

Knocking home shopping programming off the Silver King stations will not hurt the channel, as it already has coverage through its 30 million cable subscribers.

As for the planned Savoy deal, Hollywood executives called it a face-saving exit strategy for Savoy's top executives--Chairman Victor Kaufman and President Lewis Korman--as well as company financial adviser, Allen & Co.

The investment banker--which was also paid to advise Savoy on the Silver King deal for an undisclosed amount--was instrumental in creating Savoy, which has been a fiasco for investors including a group affiliated with the Pritzker family, Home Box Office and Allen & Co. itself. Savoy lost about $70 million on its movies.

Its stock, initially sold at $14.50 a share, had sunk to $5.125 as of Monday. In the deal, one share of Silver King is being swapped for ever five shares of Savoy.

Silver King shares closed Monday at $35 per share, up $4.25. Savoy closed at $5.125, up 18.75 cents. Both stocks are listed on Nasdaq.

Kaufman acknowledged that the company has been a disappointment. "We were not happy with the stock price of our company," Kaufman said in an interview. "We were not happy with our performance in the movie business. Lew [Korman] and myself, along with our major shareholders, obviously wanted to do whatever would be best to create value for shareholders."

Kaufman said Savoy's film unit will take an 18-month "pause" from the business, with a decision to come on whether the company under Silver King will re-enter the business. Kaufman said Diller has asked he and Korman to stay on.

The proposed purchase of Savoy, which owns four Fox affiliates and has $100 million in cash on its books, also seems to be a cash-flow play. Analysts speculated that Diller would liquidate the stations, worth more than $130 million, to build a war chest for programming, but Diller said he plans to keep the stations.

As for Home Shopping, despite the huge losses it has stacked up--$17.7 million in the third quarter, alone--a repositioning of the network's merchandising strategy could improve cash flow by next year, according to analysts. QVC Inc., the leading shopping channel and the nation's eighth-largest retailer, is a virtual cash machine.

"It's a low-risk strategy," said Chris Dixon, an analyst at Paine-Webber Inc. "You have the stable cash flow from Home Shopping and the ability to displace 24-hour programming on the Silver King stations gradually, adding one hour of programming, then two, then three."

"This gives Barry a bigger balance sheet to work from," said Peter Barton, the chief executive of Liberty Media Corp., which is swapping stock in Home Shopping for stock in Silver King in a deal valued at about $335 million. Liberty's stake in Silver King will rise to about 50%, from its current 20% share.


Expanding Empire

Barry Diller is bringing together a group of entertainment businesses under his control. They include:


The company owns 12 UHF stations in eight of the 12-largest markets. Diller believes he can build up these stations with local news and programming to eventually form the base of a new network.


Although it failed in the movie business, Savoy still has four VHF Fox-affiliated stations in Honolulu; New Orleans; Green Bay, Wis., and Mobile, Ala., and about $100 million in cash.


A distant second to QVC, the cable network with 30 million subscribers suffered a third-quarter loss of $17.7 million on revenue of $239.9 million.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World