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Matsushita Buys MCA in Biggest Japanese Purchase of U.S. Company

November 26, 1990 GMT

TOKYO (AP) _ In the largest Japanese purchase of a U.S. company, Matsushita Electric Industrial Co. announced today that it is buying MCA Corp., owner of Universal Studios, in a deal worth $6.6 billion.

Matsushita, a $37.8 billion giant known for such brand names as Panasonic, Quasar and Technics, is Japan’s biggest manufacturer of consumer electronics equipment.

By buying the maker of such box office hits as ″Jaws″ and ″Back to the Future,″ Matsushita seemed to be trying to keep pace with archrival Sony Corp., which bought Columbia Pictures for $5 billion a year ago, analysts said.

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Universal is the fourth Hollywood studio to come under foreign control. The deal seems likely to heighten fears in the United States that too many major U.S. companies are falling under Japanese control.

Asked how the purchase would affect U.S.-Japan relations, Matsushita’s president, Akio Tanii, said jokingly that he hoped ″MCA will make a movie called ’Japan-Bashing.‴

Under the agreement, Matsushita is to start a cash tender offer of $66 a share for MCA’s about 92.8 million shares of common stock by Nov. 30.

MCA shareholders will also get stock in a television station that cannot be sold to Matsushita because federal rules prohibit foreign-based companies from owning U.S. broadcast stations.

The deal calls for MCA shareholders to get one share in a new company that will own MCA’s New York-area television station, WWOR, for every five shares of MCA stock they own just before the tender offer is completed.

Company officials have estimated the new shares will be worth about $5 for every share of MCA stock. Adding that to the $66 per share in cash brings the per-share value to $71, or nearly $6.6 billion, for MCA’s fully diluted shares.

In trading on the New York Stock Exchange, MCA was the most actively traded issue, slipping 25 cents a share by late morning to $65.12 1/2 .

MCA Corp.’s chairman and chief executive officer, 77-year-old Lew Wasserman, stands to earn about about $355 million from the deal. Wasserman had personal holdings of 5 million MCA shares, or 7 percent, and controlled an additional 6 million through trusts and charities.

″Matsushita is a great international company,″ Wasserman said. ″This combination assures the structural integrity of MCA and its worldwide operation. MCA will continue to operate under its own name and will be run by its existing management.″

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The purchase, which followed two months of intense, sometimes frustrating negotiations, is seen as Matsushita’s attempt to dominate the growing merger of technological hardware and entertainment industries.

″Software and hardware have been developing simultaneously - they are like wheels of the same car,″ Tanii said at company headquarters in Osaka. ″We intend that excellent works made by MCA will be distributed all over the world through a variety of media.″

Analysts say Matsushita will now have a ready stock of high-profile movie and television programming to use for its high definition television, considered the next generation in home entertainment.

Nonetheless, several analysts said the much-touted ″natural″ linkup between hardware manufacturers and movie, video and TV entertainment companies is still an unproven strategy. For one thing, digitalizing older movies and TV programs for high definition TV is very expensive.

″It looks like they’re doing it and trying to figure out strategy afterward,″ said Mike Jeremy, an analyst in Tokyo for Baring Securities.

In Japan, Matsushita is jokingly called ″Maneshita,″ or ″copycat,″ for its custom of introducing products only after its competitors have tested the market for them.

But some people envision a future of integrated home entertainment consoles that would include high definition TV, a personal computer, stereo and other gadgetry. And that future may accrue to the company with the most prominent image, analysts said.

″Sony has a strong image. People in most countries would automatically know what a Walkman is,″ Jeremy said. ″Matsushita has Panasonic, Quasar and Technics, but they need to rationalize themselves into one image.″

But in an atmosphere of trade friction between the United States and Japan - not to mention the potential of a further downturn in the U.S. economy - Matsushita is taking a big risk, analysts say.

″The biggest problem is the negative image of Japanese buying up everything in the U.S.,″ said Rodney Harada, an analyst for Merrill Lynch in Tokyo. ″One of the biggest reasons I was surprised by the deal was because Matsushita has always been careful to improve its image before.″

Apart from Universal Pictures, which also produced such hits as ″E.T. the Extra-Terrestrial,″ MCA’s holdings include a robust television division featuring winners like ″Murder, She Wrote″ and ″Quantum Leap.″

MCA Records carries the popular teen vocalist Tiffany, as well as the sultry star Sheena Easton.

MCA, which earned $191 million last year on revenues of $3.4 billion, also owns a book publishing division, theme parks and real estate.

In addition to Universal and Columbia Pictures, the other two Hollywood studios to come under foreign control are 20th Century Fox, now under Rupert Murdoch’s News Corp. based in Australia, and MGM-UA Communications Inc., now owned by Italian-controlled Pathe Communications Corp.