THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, July 14, 1994 TAG: 9407140658
SECTION: BUSINESS PAGE: D01 EDITION: FINAL
SOURCE: BY GERALDINE FABRIKANT, THE NEW YORK TIMES
DATELINE: NEW YORK LENGTH: Long : 120 lines
Why is QVC Inc. so valuable to Ralph and Brian Roberts and the Comcast Corp. that they are willing to spend $2.2 billion for the company, with or without Barry Diller's management?
Responding to a skeptical Wall Street, which pushed Comcast's stock down 9 percent on Wednesday, the Robertses went on the offensive, trying to explain the buyout offer that scuttled QVC's merger with CBS Inc.
But even though Ralph J. Roberts, Comcast's chairman, and Brian L. Roberts, his son and Comcast's president, insisted they could afford the $44 a share they have offered for QVC, the acquisition price could wind up higher because their action has now put QVC ``in play.''
After a board meeting on Wednesday morning in New York, QVC, a home shopping cable company, issued a statement saying that its board had authorized management to negotiate with Comcast, the nation's third-largest operator of cable television systems, but to look for higher offers as well. And investment bankers were said on Wednesday to be scrambling to find new bidders. Among the companies most often mentioned were the BellSouth Corp. and QVC's main rival, the Home Shopping Network.
What makes QVC worth fighting for, Brian Roberts said on Wednesday, is that the home shopping channel is a valuable brand name that Comcast executives built. And though Diller, QVC's chairman, might leave the company now that his dream of merging with CBS has ended, Roberts said that Comcast has many other executives capable of running the shopping network.
``This is our only chance to buy QVC,'' he said. ``There has not been a good programming brand name up for sale in more than five years.''
To raise roughly $475 million of the purchase price, Brian Roberts told analysts in a conference call that Comcast was prepared to sell ``non-strategic'' assets, alluding to a possible reduction of its 17 percent stake in Nextel Communications, a wireless communications company.
KEN GOLDMAN, WHO HEADS Entermedia Growth Partners, an investment firm, said Wednesday he believed that QVC shareholders were being offered a reasonable price by Comcast.
``Comcast is offering $44 a share,'' Goldman said. ``Next year it could earn $240 million in cash flow. At the current price, that is 10 times next year's cash flow.'' Still, Goldman said he thought there was room for a higher offer.
The company now owns 15.6 percent of QVC, whose other large shareholders include Comcast's allies, Diller and Liberty Media, a company controlled by cable magnate John Malone.
Aside from the Robertses, QVC's investors and board members generally liked the merger with CBS. But the two men said they were reluctant to see their one cable programming asset moving into a broadcasting company in which Comcast would hold a stake of just 4.9 percent.
EVEN SO, THE DECISION to make a bid for QVC was apparently a hard one. As recently as Friday, one person close to Comcast said, the company still had not decided on whether to make it. ``It was while we talked over the weekend, that we began to realize it was a deal that really made sense,'' this person said on Wednesday.
When the offer was announced on Tuesday night, several analysts said they believed it demonstrated that the Comcast executives were furious with Diller for taking QVC away from cable. They said, too, that the offer reflected the desire of Brian Roberts, who is 35, to run QVC himself.
But on Wednesday, a partner at Lazard Freres, Comcast's investment banker, said: ``Neither Roberts approached this emotionally. It was simply the fact that QVC was moving in a different direction. Both Ralph and Brian felt very strongly that programming in general and QVC in particular were an important part of Comcast's future.''
The Roberts were instrumental in building QVC and helped to lure Diller to the company. QVC's headquarters in West Chester, Pa., are just 15 minutes away from Comcast's offices in Philadelphia.
Though Diller was aware that the Roberts were unhappy with the deal, he had bet, incorrectly, that they would go along with it, rather than bid for QVC. Several people said on Wednesday that Diller had a telephone conversation with the elder Roberts on Sunday, but was still not aware a bid was coming.
But whether Comcast can now afford that bid was the question worrying financial analysts on Wednesday. They noted that the company recently agreed to purchase the U.S. cable systems of the Canadian company Maclean Hunter Ltd. for $1.27 billion, which would push Comcast's debt to nearly $6 billion.
But Brian Roberts said on Wednesday that Comcast hoped to find a financial partner for the Maclean Hunter cable systems. He also said Comcast is discussing the sale of its 19.9 percent share of Heritage Communications, a cable operator, to Tele-Communications Inc., which owns the balance. That sale could raise $300 million, Roberts said.
After Roberts finished the conference call with analysts on Wednesday, Goldman of Entermedia said he could understand why Comcast was going after QVC.
What concerns Goldman, though, are the ``opportunity costs'' - the future ventures that Comcast may have to pass up. ``It will be very demanding,'' he said of Ralph and Brian Roberts' pursuit of their home-shopping dream. ``It forecloses them from going after other deals.'' ILLUSTRATION:
THE SPOILERS...
KNIGHT-RIDDER TRIBUNE color photo
COMCAST
Ralph Roberts, chairman
son Brian Roberts, president
...THE SPOILED
ASSOCIATED PRESS color photos
QVC
Barry Diller, chairman
CBS
Laurence Tisch, chairman
KRT color graphic
THE TWO BIDS COMPARED
Sources: Company reports, news reports
For copy of graphic, see microfilm
KEYWORDS: QVC INC.
by CNB