Why Ted Can't Take His Eyes Off Cbs

If Ted Turner had received a dollar over the past couple of years for

every news story predicting that he would soon buy a major television network, he would easily have the billions needed to purchase, say, CBS. Unfortunately, greenbacks are harder to print than headlines--which is why Turner remains on the bench, still itching to join the recent media buying frenzy.

Not that he isn't trying. Following a week in which two of the Big Three networks changed hands in a $24.4 billion flurry of dealmaking, Turner is working every angle to line up money for a run at CBS Inc. Since the Tiffany Network is betrothed, if not actually hitched, to Westinghouse Electric Corp., his courtship is complicated. But a source close to Turner says the Atlanta media magnate has enlisted the dealmaking advice of Michael R. Milken, the former junk-bond wizard. Other sources say both Turner and his biggest shareholder, Tele-Communications Inc. chief John C. Malone, have talked with Westinghouse Chairman Michael H. Jordan about investing in the Westinghouse bid.

Whether Turner can link his Turner Broadcasting System Inc. to CBS or any other network is a definite long shot. His first hurdle is Time Warner Inc., which owns nearly 18% of Turner Broadcasting. Time's chairman, Gerald M. Levin, who has veto power over any big deal, has made it plain he wants Turner to buy out Time's stake--worth about $1.2 billion on the stock market--for a premium of $1.6 billion.

Turner's solution to the Levin problem is typically Byzantine. He'd like to buy King World Productions, the syndicator of Oprah, Wheel of Fortune, and Jeopardy!, with Turner Broadcasting stock. A deal, which might come in above $1.5 billion, would give Turner access to King World's more than $500 million in cash, as well as what PaineWebber analyst Christopher P. Dixon says is $150 million in annual cash flow from contracts with TV stations. That money could offset the per-share dilution of issuing the new stock needed to pay for King World. The station contracts, meanwhile, could be leveraged to raise cash to pay off Levin.

The problem, sources say, is that Turner's board worries that King World's shows are aging. And Oprah Winfrey herself can pull out if ownership changes. Moreover, the hour before prime time once reserved for "first-run" syndications such as King World's programs recently was returned to the networks in a federal rule change. Turner, however, remains unbowed.

Even if he can jettison Time Warner, most on Wall Street think it's unlikely Turner could complete a deal for CBS. Key considerations: The Westinghouse deal has a $150 million breakup clause, and CBS Chairman Larry Tisch is no Turner fan.

So Turner and Malone may be trying to convince Westinghouse Chairman Jordan that he could reduce his risk by letting them invest in his deal. The Westinghouse bid "can't close for months yet," says one source close to the situation. "It will dawn on those Pittsburgh guys that they need to do more than just string together their TV stations with CBS'." This source says Malone first approached Jordan with the idea in late July, and Turner has been talking to him since. None of the companies would comment.

SIREN SONG. It is highly possible that nothing will happen with CBS. Indeed, there's no real reason anything has to happen. Turner is asset-heavy on its own: It has strong cable networks, a growing movie business, a rich film library, and lots of sports programming. Cash flow should hit $600 million this year. Still, the siren song of synergy makes Turner want a network: Combining CNN and CBS News alone would save $100 million in costs. "Bigger in itself is not better," says Turner Entertainment chief Scott M. Sassa. "It comes down to vision and ability to execute against that vision."

Some think Turner should just give up control and sell out to NBC, which has been aggressively buying stations and on Aug. 7 plunked down $1.27 billion for rights to the 2000 and 2002 Olympics in Sydney and Salt Lake City. "My sense is that he's going to play out his hand with CBS," says NBC Chairman Robert C. Wright. "We'll see what happens." As Wright well knows, Turner usually has another card up his sleeve.

Before it's here, it's on the Bloomberg Terminal.