Mel Offers To Buy CNN, Again

But AOL TW says news net is not for sale

Viacom President Mel Karmazin still wants to buy CNN, and, two weeks ago, he made his second offer in as many years.

AOL says it's still not for sale.

Maybe not, but that hasn't prevented AOL Time Warner from listening to numerous proposals from both CBS and ABC over the past several years to enter a news joint venture or sell CNN outright. Clearly, the broadcast-only news model is under examination, largely because of costs.

Earlier this year, after AOL Time Warner and Disney formally ended their negotiations concerning a news joint venture that would combine the assets of CNN with ABC News, there was speculation that perhaps Ted Turner would swoop in to buy the cable news network he founded in 1980.

But Turner subsequently put the kibosh on the that speculation, indicating that he had lost so much on the slide of his AOL stock—$7 billion to $8 billion—that he was in no position to make such a deal even if AOL wanted to sell. Turner said that on 60 Minutes, as a matter of fact.

But Viacom, with one of the healthiest balance sheets in the media business, could afford to buy CNN, if AOL TW would sell. Word of Karmazin's latest offer to do so emerged last week during a meeting with ad executives in New York.

No word on the price, but a recent report by Merrill Lynch media analyst Jessica Reif Cohen says CNN could fetch as much as $8.75 billion. That assumes a 2003 cash flow of $250 million and $200 million in cost savings that would go to the bottom line in the first year of Viacom operation of CNN, resulting in a price of just over 19 times cash flow.

Given the continuous flow of talks among CBS, ABC and CNN over the past few years, she concludes that the sale of CNN at some point shouldn't come as a big surprise. "In an environment increasingly driven by network cost management, we believe an outright sale would command significant interest from both Viacom and Disney."

A spokeswoman for Viacom said Karmazin wasn't available to elaborate on his most recent offer to buy CNN, but she confirmed that it wasn't the first time that he has offered to buy the network outright. He made a similar offer last year and was turned down. "It's no secret," she said, that Viacom would like to buy the network at the right price.

AOL Time Warner Chairman Dick Parsons is fond of saying that anything is for sale at the right price, but a company spokesman said last week that "CNN is not for sale." So did Phil Kent, chairman of Turner Broadcast System Inc., who wrote that to a reporter and, to emphasize the point, said it in capital letters. Insiders also confirmed that it's not being shopped around.

But news executives and Wall Street analysts believe such a deal makes a heck a lot of sense for both parties.