Rumors abound on Hanna-Barbera, Spelling sale; MCA won't get them, but foreigner may buy Spelling.

Rumors abound on Hanna-Barbera, Spelling sale

MCA won't get them, but foreigner may buy Spelling

Hanna-Barbera and Spelling Entertainment will not be a part of MCA Inc.'s entertainment empire any time soon, according to a source at Cincinnati-based Great American Communications Co., owner of the cartoon maker and the company that created "Dynasty."

In a separate and developing deal, however, West Hollywood-based Spelling appears likely to be sold to a foreign investor by the middle of June, according to sources at the company.

Speculation that Hollywood-based Hanna-Barbera Productions Inc. and Spelling, both controlled by highly leveraged Great American, would be sold in a $700 million to $1 billion package to MCA Inc., were rampant last week. A source at Great American said the reports of Hanna-Barbera's impending sale were orchestrated by short sellers of Great American shares.

The rumors cast Great American as a stumbling company, choking on debt and desperate to make a move, according to analysts. Not true, said a source close to financier Carl H. Lindner, chairman of Great American, which owns 17 radio and five television stations across the country.

In 1989 Great American gained control of Hanna-Barbera and Spelling, two very different entertainment companies. Hanna-Barbera, which holds the licensing rights to the Flinstone and Smurf cartoon characters, is worth an estimated $400 million, according to entertainment analysts. Revenues last year were $82.7 million. Spelling, which created "Dynasty," "Love Boat" and more than 10,000 hours of TV programming during the 1980s, scored big earlier this year with its "Twin Peaks" television series. The company earned $12.5 million on revenues of $143.8 million last year. Analysts peg its value at more than $330 million.

The source said Great American, with revenues of $300 million, would be able to either pay off or roll over $150 million in 13.25 percent bonds that will come due in October, without being forced to change the strategic plan -- selling only Spelling, the Chiquita banana company and a handful of FM radio stations across the country. The sale of other assets, including Hanna-Barbera, is not under active consideration, the company source said.

"Carl Lindner is concerned with what has transpired, particularly with the short interests slamming the company with rumors to the press," said Michael W. Lamb, president of a Kansas City-based brokerage house that tracks Lindner and his companies. "He does not like what has been written about Great American -- a 100-year-old company in his home town. He's a logical, brilliant man. He'll get rid of Great American's debt."

While selling the Spelling asset has been a priority since last fall, promising Hanna-Barbera is a prized property of Great American, the Cincinnati source said. With new Chief Executive Officer David Kirschner at the helm, Hanna-Barbera is clearly a Hollywood company on the move, said analyst Paul Marsh with Bateman Eichler Hill Richards Inc.

Hanna-Barbera has "Jetsons: The Movie" readying for release by Universal Pictures distribution and Hanna-Barbera characters will be featured at the Universal Studios tour. These two deals were cited as the foundation for Hanna-Barbera's impending sale to Universal, because a close relationship already existed. Analysts did say that MCA drools at the prospect of acquiring Hanna-Barbera, but it can not buy what is not for sale. MCA executives refused comment.

"We always hear rumors about the sale of the company," said Kirschner, "But I have not heard anything recently from Cincinnati."

A routine meeting between Great American president George Castrucci and MCA president Sidney J. Sheinberg, held last week in Los Angeles, provided the factual fodder for the rumor mongers. The Great American source said that the sale of Hanna-Barbera was not discussed at the meeting between the two top guns. Castrucci met with Sheinberg to discuss plans for Universal's use of Hanna-Barbera's cartoon characters and the distribution deal, the source said.

"The mission at Great American Communications since last October has been to sell Spelling," said March, an entertainment analyst in the Los Angeles offices of Bateman, Eichler. "To sell Hanna Barbera with Spelling would be an entirely different approach, a reversal in plans and a confusion of Great American's long-term strategy."

Look for Spelling to be sold in a separate deal to a foreign investment group soon, however, analysts and the source close to Lindner said.

After more than eight months of negotiations, which once included as many as 16 potential buyers, the field of bidders for Spelling has narrowed to two, said a Wall Street source. Final bids from the two undisclosed bidders are expected to be received by Great American early this week. An announcement is expected on or around May 31.

But the announcement could come at Thursday's Great American shareholder meeting, said Lamb. A scheduled meeting for analysts May 30 at a Century City hotel could also be the setting.

Spelling has been on the block since October, when it was announced that Great American, which owns about 49 percent of Spelling shares outstanding, wanted to sell the Hollywood production company. Merrill Lynch and Bear Stearns & Co. were hired to find a buyer for the firm. The deal has been slow to develop and Spelling's stock has dropped from an about $12 a share high to about $7.50 last week.