Video: A Network Blockbuster

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Jonah swallowed more than the whale last week. He also gulped down Dynasty, Hotel, Good Morning America, Monday Night Football, the 1988 Winter Olympics and Ted Koppel. It was as simple as, well, ABC. In the first purchase ever of a major television network, small and scrappy Capital Cities Communications (1984 revenues: less than $1 billion) of New York City agreed to buy the American Broadcasting Cos., which is almost four times its size. The price, $3.5 billion for ABC's 29.1 million common shares, made the acquisition the largest outside the oil industry in American corporate history. The razzle-dazzle play that captured the third-rated network (after NBC and CBS) stunned television executives like an assault from the A Team. Reverberations rumbled from Washington regulatory agencies to Wall Street investment banks. Though the buy-out was a friendly one involving two members of the broadcasting fraternity, the clubby world of the networks suddenly seemed less sacrosanct.

On the New York Stock Exchange, abuzz for the past few years with big consolidations in oil, steel and transportation, the reaction was swift and positive. Investors sensed that a new rush was developing toward stocks of communications companies, portending more big mergers and fast price rises. ABC stock shot up $31, to nearly $106, and issues of some other companies in the field also climbed sharply. At week's end CBS had gained 20 1/4, to 108 3/ 4, and RCA, parent of NBC, had risen 4 7/8, to 42 7/8. Newspaper publishers Gannett and Knight-Ridder were up too, as was the stock of Chicago's Tribune Co. Australian Publisher Rupert Murdoch, whose properties include the New York Post and New York magazine, added even more zest to the media merger mania: he offered $250 million for half the shares of 20th Century-Fox Film Corp. (see SHOW BUSINESS).

At the time of last week's announcement, ABC was not the object of a takeover attempt by anyone outside the broadcasting field, but at least one other network was under siege. Republican Senator Jesse Helms of North Carolina has helped launch an effort by Fairness in Media, a conservative group, to buy up CBS and, as he put it, "become Dan Rather's boss." The Washington Post reported last week that Atlanta's Ted Turner, the cable-TV entrepreneur, told CBS lawyers that he had had extensive discussions with Helms about taking over CBS.

In New York, Financier Ivan Boesky was rumored last week to have bought 7% to 8% of CBS for $240 million. The purchase did not mean that Boesky was gunning for the network, but it did put him in a good position to profit handsomely from any CBS takeover attempt. In Miami, the management of Storer Communications, owner of seven TV stations in cities such as Atlanta, Boston and Cleveland, was fighting off an effort by dissident shareholders to dismember the company and sell its parts.

Some Wall Streeters think that anxiety over the possibility of a hostile takeover drove ABC into a union with Capital Cities. Leonard Goldenson, 79, ABC's builder and chairman, and Executive Vice President Frederick Pierce, 52, denied that fear was their main motivation for joining Capital Cities. But they did stress that the friendly deal would allow both organizations to continue the "independence that has permitted each to flourish and to provide the finest possible service to the public." Said Goldenson: "I felt the mix was absolutely perfect."