Universal to Buy USA Stake
Universal Studios Inc. last week finally became a player in the cable television game.
The agreement by Universal’s parent Seagram Co. to buy out the half share of USA Networks owned by its former partner Viacom Inc. for $1.7 billion will give Universal a major distribution outlet for its movies and TV shows, as well as allow it to expand by buying or starting other cable channels.
USA Network was a joint venture between Seagram and Viacom that placed a major constraint on both: Under terms of the partnership, neither company could own competing cable channels.
After Viacom created the new cable network TV Land, Seagram sued for breach of contract, and a federal judge ruled in its favor but rather than assign damages, he asked the two companies to dissolve the partnership themselves. Last week’s sale was the result.
The deal is seen as a key one for Universal because it lacks television distribution outlets for its programming, and can now be expected to channel more of its television and movie library through USA and its sister, the Sci-Fi Channel.
Viacom which already owns MTV, Nickelodeon and VH-1 in addition to TV Land will use proceeds from the sale to pay down debt.
Hospital Deal
In a bid to generate more clout in negotiations with health care insurers and medical groups, non-profit Cedars-Sinai Medical Center announced plans to take over two West L.A. hospitals owned by Tenet Healthcare Corp.
The plan under discussion would place Tenet’s Century City Medical Center and Midway Hospital under a 20-year lease to Cedars-Sinai, thus creating a network of hospitals to compete for patients against the likes of UCLA Medical Center. That, in turn, would give Cedars more power in negotiating contracts with providers and insurers.
The deal is still subject to final approval by both Cedars and Tenet, as well as approval by federal regulators.
Cedars-Sinai and Tenet are also discussing plans to form a new for-profit joint venture, possibly creating a new type of health maintenance organization.
Checchi in the Race
Former Northwest Airlines Co-Chairman Alfred A. Checchi of Beverly Hills formally announced his candidacy for California governor last week, beginning what is certain to be a long and expensive struggle to gain recognition among the voters.
Checchi, who will run as a Democrat, told about 200 members of the Comstock Club that his inexperience in politics is, for him, an advantage because it means he will act less like a politician. He outlined a campaign platform that includes support for affirmative action and abortion rights, cuts in the state bureaucracy to fund education, a 25-cent increase in the cigarette tax to fund health programs, and statewide competency tests for both students and teachers.
Checchi accumulated most of his $550 million fortune by leading a takeover of Northwest Airlines in 1989, and then bringing the company back from near-bankruptcy. He has pledged to spend as much as $30 million of his own money to finance his campaign and considering he is largely unknown among voters, will likely need every penny.
Clean Gas Suit
A major patent case that could enrich El Segundo-based Unocal Corp. to the tune of hundreds of millions a year and raise the price of gasoline for California consumers went to a jury in U.S. District Court in Los Angeles last week.
Unocal was awarded a patent in 1994 for a formula to refine reformulated gasoline, a cleaner fuel that California gas stations have been selling for more than a year under state clean-air regulations. But other oil companies, including Atlantic Richfield Co., Mobil Oil Corp., Exxon Corp., Chevron U.S.A. and Shell Oil Products Co., sued to invalidate the patent.
The competitors claim that the cleaner gas formula was developed through a coalition of oil refiners and automakers, which shared research in an effort to meet state deadlines. Unocal, however, says its formula was developed by its own scientists with no help from the coalition.
Although there are numerous formulas for reformulated gasoline, the plaintiffs claim that Unocal’s patent is so broad it covers all of them. If Unocal prevails, the company could get a royalty of anywhere from 1 cent to 7.5 cents on every gallon of gas sold in California; consumers, meanwhile, would likely see a rise in pump prices.
Big BofA Commitment
San Francisco-based BankAmerica Corp. last week made the biggest community loan commitment ever by a U.S. bank, pledging $140 million in loans to small businesses, minority homebuyers and low-income consumers over the next 10 years.
Although about half of the loans are expected to be made in California, BankAmerica hasn’t been determined how much money it will pump into the Southern California economy. Still, observers expect the commitment to help keep L.A.’s improving economy on track, because local small businesses are hungry for financing.
The commitment by BankAmerica, parent of Bank of America, is almost twice as big as the previous highest community reinvestment commitment a $75 million pledge by Washington Mutual Inc. that was made to help clear regulatory hurdles for its merger with Great Western Financial Corp. BofA’s commitment is all the more unusual because it was not made as the result of a pending acquisition or merger.
Jiang Coming to L.A.
Chinese President Jiang Zemin, who recently strengthened his position at the top of China’s power structure, will make a one-day visit to Los Angeles in early November, U.S. officials announced last week.
Jiang’s visit to the United States would mark the first time since 1979 that China’s top official has come to this country. He is expected to tour Hughes Space & Communications in El Segundo, and has made a tentative agreement to speak Nov. 2 before guests of Town Hall Los Angeles and the Asia Society.
Welfare Reform Failure
As an Oct. 1 federal welfare reform deadline approaches, failures by the state of California to meet certain requirements could cost the state up to $4 billion in federal funds.
Under the federal welfare reform law enacted last year, states around the country are required to meet the following requirements by Oct. 1: 25 percent of each state’s overall welfare caseload and 75 percent of their two-parent welfare families must have jobs, and the states are required to put in place a program for tracking down and collecting child support payments from deadbeat parents.
In California, 33 percent of the overall welfare population is employed but only 20 percent of two-parent welfare families have jobs. And the state is nowhere close to having a child support program in place. As a result, the federal government is authorized to exact heavy financial penalties although most observers believe the federal government will push back the deadline.
Compiled by Dan Turner
