Paramount Shares Soar on Rumors of a TCI-Turner Takeover

The stock of Paramount Communications Corp. hit a 52-week high Friday amid speculation that the entertainment and media company is being targeted for a merger or acquisition by Denver-based cable TV giant Tele-Communications Inc. and cable mogul Ted Turner.

Sources close to the companies confirmed that discussions have taken place in recent days, but they also cautioned that it is premature to predict the outcome. Any possible deal might also be impractical before this fall, when new federal regulations on ownership of cable TV assets are scheduled to be drawn up.

Paramount, long the subject of takeover or merger rumors, is the last of the independently owned Hollywood movie studios.

One factor said to be driving the talks is Turner’s desire to break free of his largest shareholders, TCI and Time Warner Inc. Discussions between the companies, which derailed earlier over complex tax issues, have recently resumed. One option under consideration, sources say, is that TCI and Turner would make a joint bid for Paramount and that Time Warner, which owns 19% of the Turner Broadcasting System, would acquire Turner’s Cable News Network.

The talks have reportedly been spurred by the mutual interest of TCI Chairman John C. Malone and Turner in acquiring a film and TV studio to help fill the anticipated programming demand by the end of the decade, when 500-channel cable TV systems are expected.

In addition, Turner is said to have felt constrained by his corporate partners, who have exercised caution while the cable entrepreneur favors a more aggressive style.

One big unknown in the scenario circulating on Friday is what role if any former Fox Inc. Chairman Barry Diller would play in a possible TCI-Turner bid for Paramount.

Diller is chairman of the home shopping channel QVC, which is 53%-owned by Liberty Media Corp. Liberty Media, in turn, is controlled by Malone. The two executives have cooperated on several ventures and share great respect. Diller was also chairman of Paramount Pictures in the early 1980s and was instrumental in the launch of the Fox TV network.

On Friday, Paramount’s stock closed up 62.5 cents at a 52-week high of $55.75 on the New York Stock Exchange. TCI rose 37.5 cents to $22.75 in NASDAQ trading. And TBS shares slipped 62.5 cents to $21 on the American Stock Exchange.

Spokespersons for all three companies declined to comment.

Wall Street has long viewed Paramount as a prime acquisition target. The parent of Paramount Pictures and publisher Simon & Schuster, after years of selling non-strategic assets, now has more than $1 billion in cash.

Paramount Chief Executive Martin S. Davis is said to be anticipating possible changes in regulations that would force cable TV companies to sell programming assets, and to be weighing various possibilities that may result.

Those changes could include new rules limiting “vertical” integration of cable TV companies. In anticipation of those changes, TCI several years ago spun off most of its programming assets, including ownership stakes in cable TV channels Black Entertainment Television, Encore and Home Shopping Network, into the separately run Liberty Media.

One big question mark, however, is what would happen to Paramount chief Davis. Few can envision an executive suite big enough for both him and Turner.

Davis may also orchestrate a different scenario, one industry source said, by making an offer for Thorn EMI, the London-based music giant. Such a move would keep Davis in charge and at the same time deliver the long-awaited mega-deal that many investors expect him to lead.

Times Staff Writers Kathryn Harris and Carla Lazzareschi contributed to this story.