Nordic Ripples From Disney's Deal

Go Scandinavian, if you want an outside play on Walt Disney's surprise $19 billion acquisition of Capital Cities/ABC. Buy Scandinavian Broadcasting Systems, that is, say some pros. Its shares (SVTVF) jumped 31/4, to 27, two days after the July 31 announcement of the deal. The reason: Cap Cities has a 23.5% stake in Scandinavian, which owns and operates six commercial TV stations in Scandinavia and the Benelux nations, plus radio stations in Denmark, Finland, and Sweden. The company also has an application to operate in Britain through a consortium.

The merger is a big plus for Scandinavian, partly "because of Disney's commitment to expand into international markets," says Melissa Cook, an analyst at Prudential Securities. John Whittier of Donaldson, Lufkin & Jenrette Securities, thinks so, too. "With Disney coming into the fold, Scandinavian is in an even better position to develop its operations across Scandinavia and other parts of Europe," he said.

All that makes Scandinavian an attractive property, especially to the likes of Viacom, which has a 7% stake in Scandinavian. Through its Paramount unit, Viacom has a 10-year pact to supply movies to Scandinavian.

Cook's initial target for Scandinavian is 35 a share. But the stock may overshoot the mark. Viacom may opt to go after Scandinavian to protect its interests. Cap Cities has a standstill agreement not to exceed a 25% stake until November, 1996. Beyond that, Cap Cities may go after the slice of the stock it doesn't already own. Or it could be sold to another buyer.

Cook calculates the private market value of Scandinavian at 57 a share.

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