That bit of lore defines Sumner Redstone. it should be remembered by anyone who doubts his ability to pull off a proposed $8 billion merger of his Viacom Inc., home to hip MTV and Nickelodeon, with the venerable Paramount Communications. Such doubts flooded Wall Street last week on reports that Barry Diller, a former studio boss turned home-shopping magnate, and Ted Turner were also taking aim at Paramount. Can Redstone, a square by Hollywood standards, outsmart some of the country’s most aggressive moguls? This much is clear: Redstone may find himself at the center of the fiercest takeover fight in the entertainment business since Paramount, Warner Communications and Time Inc. battled it out in 1989.
If so, Redstone can bank on the relentless tenacity he showed during that Boston fire. Certainly his ambition, notwithstanding his 70 years, is all-consuming. He has long wanted to count among Hollywood’s top players, a rival to the likes of Turner and Rupert Murdoch, and may soon be. “We’re creating a colossus,” Redstone boasts of the Paramount acquisition. With a combined market value of $16 billionspanning major interests in movies, television, cable systems and publishing–the new Paramount Viacom International Will be the world’s fifth biggest entertainment conglomerate. But even that’s not enough for Redstone. “We will be No. 1,” he told NEWSWEEK, punching the air for emphasis. “Not No. 5. Not No. 2. No. 1!”
It’s surprising that the man in the spotlight is, at bottom, so little known. But that’s the way the flinty Bostonian likes it. By and large, his rise has been slow and almost invisible. The grandson of Russian and German immigrants (the family name was originally Rothstein), Redstone has always been a low-key superachiever. He graduated first in his Boston high-school class, attended Harvard and then, during World War II, was recruited for the supersecret intelligence team that broke Japan’s military codes. From there he went on to Harvard Law School and a job at the justice Department. During the 1950s Redstone joined his father’s theater business, eventually taking over and building it into National Amusements Inc., a Massachusetts-based chain that today runs 800 screens in a dozen states, including Showcase Cinemas. Forbes magazine puts his fortune at $4.2 billion, ranking him among the country’s richest men. Redstone wears his wealth lightly; for more than 30 years, he has lived in a modest three-bedroom house in the suburb of Newton.
Redstone’s career has been punctuated by bold strokes–“visions,” he sometimes calls them. During the 1970s he pioneered the ubiquitous “multiplexes”–multiple-screen theaters–that now dot every suburban mall. Then came the new video and cable technology. Believing they would undercut his cinemas, he bought into the trend in 1987 by acquiring a cable operator, Viacom Inc. It cost $3.2 billion, most of which Redstone borrowed. Bankers thought he might break up the company and spin off some pieces. Instead, Redstone built Viacom into one of the world’s hottest TV properties. Nickelodeon is the premier kids’ channel. Showtime and The Movie Channel sustain couch potatoes nationwide. MTV has created its own generation, reaching more than 200 million households in some 80 countries and, along the way, helping make Viacom’s balance sheet the envy of the industry.
Now Redstone foresees a new technological wave, and Paramount is his ticket to ride. He talks excitedly about the coming Digital Age, the era of 500 TV channels and the Information Superhighway. To satisfy exploding demand for new information and entertainment, companies like Viacom will need to develop huge amounts of new programming. (Rather than buy new programs from independents, many of the new entertainment consortiums are betting they can create it more cheaply themselves.) That’s why Redstone describes the coupling with Paramount as a “marriage made in heaven.” That’s why he chased last week’s deal for four years. “I was relentless,” he says. “I saw the power of this combination. I always saw. This was an act of destiny.” By tying up with Viacom, he explains, Paramount gains an enormous new cable market for its movies (recent releases include “The Firm” and “Indecent Proposal”) and television programs (such as “Cheers” and “Star Trek”). On the flip side, Viacom taps into the full range of Paramount’s vast film and publishing empire, including its huge movie library. “Synergies” will flow. Paramount Viacom will beam innovative interactive video games into the home, produce major Paramount movies for Showtime, even create a family-movie division at Nickelodeon that might one day rival Disney.
Neat stuff, so long as the deal goes through. But will it? “This deal only makes sense for Viacom,” says one skeptical studio exec. His logic: Viacom’s stock prices are too high, partly because Redstone himself bought heavily in recent months. If prices slide, as they have this week, his offer becomes less valuable, since Viacom essentially proposes to swap its shares for Paramount’s. That, in turn, makes it easier for rival bidders to enter the fray. So far speculation has centered on Diller, chiefly on news that he has hired Allen & Co., New York investment bankers, to evaluate Redstone’s offer. Diller is not as rich as Redstone, but he has backing from John Malone, bead of giant Tele-Communications Inc. and a partner in QVC, Diller’s TV shopping network. Other names have also popped up. David Geffen, the billionaire music mogul, is said to be interested. So is Ted Turner, the maverick founder of CNN and the Turner Broadcasting System. Turner earlier this year informally discussed a possible deal with Paramount, and late last week his board authorized him to make a second pass.
Paramount chief Martin Davis insists the Viacom merger will go ahead regardless. “No one can compete with this bid,” Davis says. Promising that Paramount “will take every step necessary to see this deal through,” he warned Diller, Malone and “anyone else” not to interfere. Saber rattling alone won’t deter the hunters, and Diller & Co. could yet mount a credible threat.
But will they? They would have to pay a significantly higher price than Viacom. For one thing, the Viacom-Paramount deal is a stock swap. (Diller would have to put up cash.) That saves Paramount shareholders from a big tax hit. In addition: under terms of the deal, Paramount would have to pony up $100 million–to Viacom if the merger falls through. Redstone would probably relish the battle, in any case. After all, he is not exactly one to flinch under fire. To anyone who wonders why he is so determined to pull off the deal, he tartly replies: “I want to win. That’s why. I want to win!”
