Takeovers: A Thriller For Film Companies

FIRST it was Sony Corporation's $3.4 billion buyout of Columbia Pictures. Then it was Mitsubishi's $846 million controlling interest in the Rockefeller Group, Inc., which owns the prestigious Rockefeller Center in New York. Containing Radio City Music Hall and studios of the National Broadcasting Company, Rockefeller Center is regarded as a landmark in the US entertainment industry. Is that industry, particularly Hollywood, suddenly vulnerable to takeovers by Japanese and other foreign buyers - as well as US companies? The Time/Warner deal and other, smaller linkups are fresh in the minds of investors.

Industry officials and some media analysts don't rule out new acquisitions and mergers. However, they maintain that some entertainment companies are overvalued, partially as a result of the industry's box-office success this year. Long lines have formed for such movies as ``Batman'' and ``Indiana Jones and the Last Crusade.'' Such important film companies as MCA Inc. (Universal), Paramount, and Disney have been the object of takeover talk.

If more overseas acquisitions do occur, it could pay off for US stockholders. Variety, the entertainment weekly, asks: ``Are the predators being suckered into overpaying?''

Should Japanese investors think ``Hollywood,'' they would have the enormous assets required for such transactions. They have grown increasingly nervous about the Tokyo stock market in recent weeks, moving some money out of stocks into cash or government bonds.

Europeans may also get eventually into line for US media companies. ``The media industry is somewhat smaller in Europe than it is in the United States,'' says John Tinker, an analyst with Morgan Stanley & Company. European media firms have so far been mainly interested in US publishing firms, he says. Mr. Tinker currently recommends three media companies: United Artists Entertainment, the largest US theater chain; Tele-Communications Inc., a multimedia cable company; and CBS Inc., which, he notes, has sizable cash assets of about $100 per share.

The US movie business could do especially well in its important Thanksgiving-Christmas holiday season, analysts say.

Three companies now look very strong, say stock analysts: MCA's Universal will soon release ``Back to the Future II''; Paramount, which earlier this year gave us ``Indiana Jones'' will release Eddie Murphy's ``Harlem Nights''; and Disney, which has had such hits as ``Dead Poets Society'' and ``Honey, I Shrunk the Kids,'' will release ``The Little Mermaid,'' an animated fairy tale.

Christopher Dixon, an analyst with Kidder, Peabody & Company, holds that precisely because ``everyone is looking for the next Time/Warner merger,'' many entertainment stocks have been bid up in price. He suggests investors await a period of market weakness before buying them.

Mr. Dixon remains dubious about any new rush of acquisitions or mergers. The companies ``are not for sale,'' he says. They would be very expensive. And who, he asks, is ``going to run them'' once they're taken over?

Some firms, such as Disney, would be hard to acquire. Disney is a truly multimedia company, experts note, with theme parks, television, and film divisions, as well as lucrative global licensing agreements. Disney is just a ``solid'' stock, says Lazlo Birinyi Jr., former chief market strategist of Salomon Brothers and now head of his own investment firm, Birinyi Associates.

Mr. Birinyi believes that stock prices will probably not rise much over the rest of the year. So a stable stock like Disney should be relatively attractive, he says, noting that Disney now has the largest tourist attractions both in Asia and the United States. If ``Disney-Europe comes out as well,'' the company will continue to be a fine investment, he says. Disney has been trading in the $123 to $125 a share range. Birinyi would take a profit when it reached around $130. So far as a takeover, Birinyi wonders how that could possibly occur, given the firm's one-fourth ownership by a family-based Texas investment group.