What Will Marty Davis Do With All That Cash?

Martin S. Davis is getting a bit cranky about all the speculation. For over a year now, the chief executive officer of Paramount Communications Inc. has been sitting on about $1.6 billion in cash--and Wall Street can't wait for him to make a big acquisition or, better yet, sell out to the Japanese. The rumor of the month? That Davis has been shopping the company--a notion that the prickly 63-year-old finds ludicrous. "We're not looking to get bought out," he snaps.

Davis has spent several years unloading assets to transform Paramount from an unwieldy conglomerate to a pure publishing and entertainment company. Ever since selling the company's financial services arm and making an aborted $200-a-share bid for Time Inc. in 1989, Davis has been on the prowl. Before MCA Inc. was picked off by Matsushita Electric Industrial Co., Davis had talked on and off for years about a merger. The stumbling blocks at the time: price and management control. Sources say he also explored deals with Six Flags, Bertelsmann Music Group, and cable giant Tele-Communications.

BLOODIED. The cash puts Davis in an enviable position. Even before the recession hit, media and entertainment companies took a nasty beating. Many of the stocks are off by 50% over the last year--and so are asset valuations. "Values could get even better," says analyst Emanuel Gerard of Gerard Klauer Mattison & Co.

A lot of folks figure Davis also has other reasons for hoarding his dough. The Federal Communications Commission may scrap the rules that keep TV networks from owning financial stakes in programming and, by extension, keeps them from merging with Hollywood producers. Davis would love to get hold of a huge distribution network for Paramount films and TV shows. The company made an attempt a few years ago, along with MCA, to cobble together a network of its own but couldn't sign up enough independent stations. Of course, once the networks are up for grabs, he will have plenty of rivals. But that $1.6 billion will certainly help.