Westinghouse Cuts Deal To Buy Cbs Network

Another day, another blockbuster broadcast merger.

Just a day after Walt Disney Co. startled the financial world by buying Capital Cities/ABC Inc., Westinghouse Electric Corp. Tuesday agreed to buy CBS Inc. in a deal that had been widely anticipated. The Pittsburgh conglomerate said it would pay $5.4 billion or $81 per share in cash for CBS.

At a joint news conference, the leaders of the two companies praised each other and said they would create a powerhouse in broadcasting. Westinghouse owns eight television stations.

“We expect to restore CBS television to its historic position as the No. 1 television network,” said Michael Jordan, Westinghouse’s chief executive. CBS Chairman Laurence Tisch said the deal “joins two great companies with tremendous depth and a rich history in broadcasting.”

Coming after Disney’s blockbuster $19 billion bid for Capital Cities, Tuesday’s announcement seemed somewhat anticlimactic. And according to analysts, the Westinghouse-CBS combination will trail its rival in more than just pizzazz.

“You have to think these guys are something of a small player now,” said Israel Shaked, a professor at Boston University’s School of Management. In the rapidly consolidating entertainment business, CBS will be far smaller than competitors like Disney, Time-Warner Inc., Viacom International and Rupert Murdoch’s News Corp. It lacks the strength in creating programming that many of those companies have, said Shaked. It also has a limited presence in music, cable television and in the international arena, all areas where growth is expected to be strong.

Whereas Disney and ABC are both regarded as top-notch companies, Westinghouse and CBS are described in less flattering terms.

Westinghouse is a frog trying to become a prince. The company has fared poorly in its traditional industrial businesses, say analysts, and is looking to transform itself into a more profitable, more glamorous entertainment player.

CBS is a prince that became a frog. Once considered the class of the television industry, CBS finished third among the television networks in ratings last season. Its news operation, which produced Edward R. Murrow and Walter Cronkite, today is no match for ABC in both ratings and reputation.

Some money managers Tuesday speculated that another bidder could still emerge who would pay even a higher price for CBS. “Once the speculative juices start flowing, it is hard to slow them down,” said Philip Fine, an analyst with Keystone Investments in Boston.