Ron Perelman, one of the wealthiest men in America, sits down for his first ever Q&A.
Marvin R. Shanken
From the Print Edition:
Ron Perelman, Spring 95
(continued from page 9)
Shanken: The big impetus for the cigar industry is young guys in their 20s and early 30s who've entered the market for the first time. They represent a huge opportunity. And on a much smaller scale, women. It doesn't seem like anyone has gone after those markets, each of which may represent a big marketing opportunity. Why is that?
Perelman: I think you're right. I think the younger smokers will start to be viewed much more seriously by the manufacturers. Women are still very rare. It's sometimes used today by a woman as a device to show that she's hip or liberated or a worldly person. The industry has tried for years to induce and entice women to smoke, and it hasn't worked.
Shanken: Let me move to a few other subjects. The recent creation of New World Communications attracted a significant investment from another significant media player, Rupert Murdoch. The deal has catapulted you into being a major player in the media world. How do you envision the television-broadcasting world changing? What do you see for the future? How did you create, almost overnight, this major television business?
Perelman: We were presented with a transaction a little over a year ago to buy the old SCI stations, which was our first station group. It was a very intriguing financial acquisition. There were seven stations, top 20 markets. It was Detroit, Atlanta, San Diego, Boston, Milwaukee, Cleveland and Tampa. Good markets. We were able to buy those at a price of slightly less than six times cash flow. It was a very good financial transaction. We had never put on our screen that one of our top industries to go into was TV broadcasting. But that transaction made such enormous sense that we entered the industry. We then decided once we were in it to be really in it. We contracted to buy two other station groups, the old GACC (Great American Communications Company) and Argyle Communications stations. On a parallel track, we had several years ago purchased a small television producer called New World Entertainment. And putting the two together made enormous financial sense to both companies, in that we had a captive market for the production of our product. Out of the blue comes Rupert, who wants to increase his affiliation base, and we were able to do a transaction that allows us a 10-year affiliation agreement with Fox.
Shanken: Fox had just gotten the NFL?
Perelman: Right. The fact that CBS lost the NFL, and the fact that Fox got the NFL were important to us. We got an investment of somewhere around $500 million and, at the same time and probably more important than either of those two, we got programming clearances--not commitments, clearances--on the Fox-owned-and-operated stations. So that we now have, between our o&o's [owned and operated] and the Fox o&o's, about a 45 percent carry of our product. We have a station base now that allows us to clear 45 percent of the country from day one, which was as important as any of the other two elements in the transaction.
Shanken: Murdoch came to you with this proposal?
Perelman: The proposal came about at a meeting between Bill Bevins, who runs New World, and Murdoch.
Shanken: You were able to get fresh capital so that on a market-value capitalized basis, it put the value of the business at a much higher level.
Perelman: It was a good move for everybody. And that's the best kind of deal: when both players leading the transaction are happy that it's a fair transaction.
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