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Japan Electronics Giant Gobbles ‘Jaws’ Maker MCA in Hollywood Megadeal

November 27, 1990

UNIVERSAL CITY, Calif. (AP) _ The MCA conglomerate that gave Americans ″E.T.,″ Guns N’ Roses and ″Murder, She Wrote″ was purchased in a $6.6 billion deal - the latest marriage of Japanese electronics wizardry to Hollywood’s dream factories.

MCA Inc., the parent company of Universal Studios, was bought by Matsushita Electric Industrial Co. - known as the maker of Panasonic, Technics and Quasar products - in the largest-ever purchase of a U.S. company by a Japanese one.

The buyout, announced Monday, accomplishes an objective for Matsushita, which needed the entertainment ″software″ of MCA to complement its electronics ″hardware″ - the televisions, VCRs, radios and stereos it makes.

The combination mirrors one struck by Sony Corp., which bought Columbia Pictures Entertainment Inc. for $5 billion a year ago.

With MCA, Matsushita will try to compete more effectively against its archrival Sony and shake its image as a copycat exploiting the technological advances of other companies.

MCA, which began 65 years ago as a booking agent for jazz bands, has grown to become a colossus of films (″E.T. the Extra-Terrestrial,″ ″Jaws,″ ″Back to the Future″), records (Reba McEntire, Elton John, Guns N’ Roses, Bobby Brown, George Strait) and television (″Murder, She Wrote,″ ″Major Dad″).

Its Universal Studios theme parks in Florida and California are exceeded only by Disney’s.

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

Record executive David Geffen stands to get more than $700 million from his MCA shares.

″I would be happier if it was more, sure. But I’m very happy with the price,″ said Geffen, who received his stock when his Geffen Records was acquired by MCA last year and who continues to run the company. ″The Japanese bought a spectacular company, and we got a spectacular deal.″

Big foreign investments in Hollywood have become a regular occurrence since Rupert Murdoch’s Australia-based News Corp. bought 20th Century Fox in 1985.

Just this month, MGM-UA Communication Co. was purchased by Italian financier Giancarlo Parretti’s Pathe Communications for $1.3 billion. Disney said last month it was beginning a partnership to raise at least $600 million from Japanese investors to make movies.

Until the MCA deal, Sony’s acquisition of Columbia was the largest Japanese purchase of a U.S. business. Sony also owns CBS Records.

The merged Matsushita and MCA will yield a far larger company. Their combined revenues in 1990 will be $51 billion, according to the Value Line Investment Survey. That compares with $27 billion for Sony-Columbia, and $11 billion for the largest studio-based U.S. conglomerate, Time-Warner Inc.

″This agreement ... will create synergies that neither company could achieve alone,″ said MCA Chairman Lew Wasserman.

MCA President Sidney Sheinberg said the decision to sell MCA was difficult, adding: ″They have indicated their respect for our autonomy and corporate culture.″

Despite those assurances, the acquisition seems certain to provoke critics of Japanese investment in the United States, like the Columbia deal and the recent purchases of real estate trophies such as Rockefeller Center in New York City and Pebble Beach in California.

Matsushita is barred by federal law from owning one key MCA property, WWOR- TV in the New York area. That station will be spun off into a separate company with MCA’s current shareholders owning its stock.

Addressing another sore point, Matsushita said MCA’s Curry Co. subsidiary, which operates restaurants, hotels and other services in Yosemite National Park, will be sold within a year.

Curry is a tiny though highly profitable part of MCA’s business. The idea of it being Japanese-owned produced harsh criticism.

Complaints go much further. The record producing and composing legend Quincy Jones, expressing the private fears of many in Hollywood, said recently that foreigners are being allowed to buy America’s legacy.

In addition, Jewish groups have protested Matsushita’s honoring of the Arab-sponsored boycott of Israel.

″Matsushita’s discriminatory policies are not only reprehensible on ethical grounds but contradict the bedrock principle of free and open trade between nations,″ the World Jewish Congress said Monday.

Most independent observers say Matsushita knows it is foolish to meddle with an American success that has never been duplicated abroad.

They believe it will follow the lead of Sony, which has lavished hundreds of millions of dollars on megastars like Michael Jackson and megaproducers like Peter Guber and Jon Peters, while adopting a generally hands-off style toward management of its U.S. entertainment holdings.

″It doesn’t help them to interfere in the creative process and interfere in the quality of the product for some philosophical, political or other purpose,″ said Jeff Logsdon, an entertainment analyst with Siedler Amdec Securities Inc.

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