<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
SPELLING ENTERTAINMENT GROUP INC.
(Name of Issuer)
--------------------------
SPELLING ENTERTAINMENT GROUP INC.
VSEG ACQUISITION INC.
VIACOM INTERNATIONAL INC.
VIACOM INC.
(Name of Person(s) Filing Statement)
--------------------------
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
--------------------------
847807
(CUSIP Number of Class of Securities)
--------------------------
<TABLE>
<S> <C>
MICHAEL D. FRICKLAS, ESQ. SALLY SUCHIL, ESQ.
VSEG ACQUISITION INC. SPELLING ENTERTAINMENT GROUP INC.
VIACOM INTERNATIONAL INC 5700 WILSHIRE BOULEVARD
VIACOM INC. LOS ANGELES, CA 90036-3659
1515 BROADWAY (323) 965-5700
NEW YORK, NY 10036
(212) 258-6000
</TABLE>
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
--------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
CREIGHTON O'M. CONDON, ESQ. ROBERT B. PINCUS, ESQ.
Shearman & Sterling Skadden, Arps, Slate, Meagher & Flom
599 Lexington Avenue One Rodney Square, 7(th) Floor
New York, NY 10022 Wilmington, DE 19801
(212) 848-4000 (302) 651-3000
</TABLE>
------------------------
This statement is filed in connection with (check the appropriate box):
a. / / The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. /X/ A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: / /
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
<S> <C>
$250,662,468 $50,133.00
</TABLE>
* Calculated by multiplying $9.75, the per share tender offer price, by
25,708,971, the sum of the 18,081,798 shares of currently outstanding Common
Stock sought in the tender offer and the 7,627,173 shares of Common Stock
subject to options that will be vested as of the Effective Time of the
Merger, each as defined herein.
** Calculated as 1/50 of 1% of the transaction value.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $50,133.00 Filing Party:VSEG Acquisition Inc., Viacom
Form or Registration No.: Schedule 14D-1/13D International Inc. and Viacom Inc.
Date Filed: May 21, 1999
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") is being filed by (i) Viacom International Inc., a Delaware corporation
("Parent"), (ii) VSEG Acquisition Inc., a Delaware corporation ("Purchaser") and
a wholly owned subsidiary of Parent, (iii) Viacom Inc., a Delaware corporation
("Viacom"), and (iv) Spelling Entertainment Group Inc., a Delaware corporation
(the "Company"), pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended, and Rule 13e-3 thereunder, in connection with the tender offer
by Purchaser for all issued and outstanding shares (the "Shares") of common
stock, $0.001 par value, of the Company not already owned by Parent or any of
its affiliates, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 21, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which together constitute the "Offer"), copies of which
are filed as Exhibits (d)(1) and (d)(2) hereto, respectively. Parent is a wholly
owned subsidiary of Viacom Inc.
The following Cross Reference Sheet, prepared pursuant to General
Instruction F to Schedule 13E-3, shows the location in the Tender Offer
Statement on Schedule 14D-1 filed by Parent and Purchaser (the "Schedule 14D-1")
with the Securities and Exchange Commission on the date hereof of the
information required to be included in this Schedule 13E-3. The information set
forth in the Schedule 14D-1, including all exhibits thereto, is hereby expressly
incorporated herein by reference as set forth in the Cross Reference Sheet and
the responses in this Schedule 13E-3, and such responses are qualified in their
entirety by reference to the information contained in the Offer to Purchase and
the annexes thereto.
The information contained in this Schedule 13E-3 concerning the Company,
including, without limitation, the information concerning the background of the
transactions, the deliberations of the Company's Board of Directors in
connection with the transaction, the opinion of the Company's financial advisor
and the Company's capital structure and historical financial statements and
projections, was supplied by the Company. Purchaser, Parent, and Viacom take no
responsibility for the accuracy of such information. The information contained
in this Schedule 13E-3 concerning Purchaser, Parent and Viacom was supplied by
Purchaser, Parent and Viacom. The Company takes no responsibility for the
accuracy of such information.
2
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN WHERE LOCATED IN
SCHEDULE 13E-3 SCHEDULE 14D-1
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Item 1(a).................................................................................. Item 1(a)
Item 1(b).................................................................................. Item 1(b)
Item 1(c).................................................................................. Item 1(c)
Item 1(d).................................................................................. *
Item 1(e).................................................................................. *
Item 1(f).................................................................................. *
Item 2(a).................................................................................. Item 2(a)
Item 2(b).................................................................................. Item 2(b)
Item 2(c).................................................................................. Item 2(c)
Item 2(d).................................................................................. Item 2(d)
Item 2(e).................................................................................. Item 2(e)
Item 2(f).................................................................................. Item 2(f)
Item 2(g).................................................................................. Item 2(g)
Item 3(a).................................................................................. Item 3(a) and 3(b)
Item 3(b).................................................................................. Item 3(b)
Item 4..................................................................................... *
Item 5..................................................................................... Item 5
Item 6(a).................................................................................. Item 4(a)
Item 6(b).................................................................................. *
Item 6(c).................................................................................. Item 4(b)
Item 6(d).................................................................................. *
Item 7(a).................................................................................. Item 5
Item 7(b).................................................................................. *
Item 7(c).................................................................................. *
Item 7(d).................................................................................. *
Item 8..................................................................................... *
Item 9..................................................................................... *
Item 10(a)................................................................................. Item 6(a)
Item 10(b)................................................................................. *
Item 11.................................................................................... Item 7
Item 12(a)................................................................................. *
Item 12(b)................................................................................. *
Item 13.................................................................................... *
Item 14.................................................................................... *
Item 15(a)................................................................................. *
Item 15(b)................................................................................. Item 8
Item 16.................................................................................... Item 10(f)
Item 17.................................................................................... Item 11
</TABLE>
* The Item is located in the Schedule 13E-3 only.
3
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a)-(c) The response to Item 1(a)-(c) of the Schedule 14D-1 is incorporated
herein by reference.
(d) The information set forth in the Offer to Purchase under "THE TENDER
OFFER--Section 6. Price Range of Shares; Dividends" is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS--Beneficial Ownership of Common Stock" and "THE TENDER OFFER--Section 8.
Certain Information Concerning Purchaser, Parent and Viacom" is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is being filed by Purchaser, Parent, Viacom
and the Company. The response to Item 2 of the Schedule 14D-1 is incorporated
herein by reference as to Purchaser, Parent and Viacom. The information
concerning the name, state or other place of organization, principal business
and address of the principal office of Purchaser, Parent, Viacom and the
Company, and the information concerning the name, business address, present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment or occupation
is conducted, material occupations, positions, offices or employments during the
last five years and citizenship of each of the executive officers and directors
of Parent, Purchaser, Viacom Inc. and the Company is set forth under
"INTRODUCTION," "THE TENDER OFFER--Section 8. Certain Information Concerning
Purchaser, Parent and Viacom" and in Schedule I of the Offer to Purchase and is
incorporated herein by reference.
(e)-(f) The response to Item 2 of the Schedule 14D-1 is incorporated herein
by reference with respect to Purchaser, Parent and Viacom. During the last five
years, none of Purchaser, Parent, Viacom or the Company, nor, to the best
knowledge of Purchaser, Parent, Viacom or the Company, any of the persons listed
in Schedule I of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The response to Item 3 of the Schedule 14D-1 is incorporated herein
by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Offer to Purchase on the cover page
thereof and under "INTRODUCTION," "SPECIAL FACTORS--Background of the Offer and
the Merger," "SPECIAL FACTORS--The Merger Agreement," "THE TENDER OFFER--Section
1. Terms of the Offer; Expiration Date," "THE TENDER OFFER--Section 2.
Acceptance for Payment and Payment for Shares," "THE TENDER OFFER--Section 3.
Procedures for Accepting the Offer and Tendering Shares," "THE TENDER
OFFER--Section 4. Withdrawal Rights," "THE TENDER OFFER--Section 12. Certain
Conditions of the Offer" and "THE TENDER OFFER--Section 15. Miscellaneous" is
incorporated herein by reference.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) The response to Item 5(a)-(e) of the Schedule 14D-1 is incorporated
herein by reference.
4
<PAGE>
(f)-(g) The response to Item 5(f)-(g) of the Schedule 14D-1 is incorporated
herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The response to Item 4(a) of the Schedule 14D-1 is incorporated herein
by reference.
(b) The information set forth in the Offer to Purchase in "SPECIAL
FACTORS--Fees and Expenses" and "THE TENDER OFFER--Section 14. Solicitation Fees
and Expenses" is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The response to Item 5 of the Schedule 14D-1 is incorporated herein by
reference.
(b) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS--Background of the Merger" and "SPECIAL FACTORS--Purpose and Structure
of the Offer and the Merger; Reasons of Parent and Purchaser for the Offer and
the Merger" is incorporated herein by reference.
(c)-(d) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS--Background of the Offer and the Merger,"
"SPECIAL FACTORS--Recommendation of the Company's Board; Fairness of the Offer
and the Merger," "SPECIAL FACTORS--Purpose and Structure of the Offer and the
Merger; Reasons of Parent and Purchaser for the Offer and the Merger," "SPECIAL
FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects
of the Offer and the Merger," "THE TENDER OFFER--Section 5. Certain U.S. Federal
Income Tax Consequences" and "THE TENDER OFFER--Section 11. Effect of the Offer
on the Market for the Shares, the NYSE, the PE and the Exchange Act
Registration" is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(e) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS--Background of the Offer and the Merger,"
"SPECIAL FACTORS--Recommendation of the Company's Board; Fairness of the Offer
and the Merger," "SPECIAL FACTORS--Position of Viacom Regarding Fairness of the
Offer and the Merger," "SPECIAL FACTORS--Purpose and Structure of the Offer and
the Merger; Reasons of Parent and Purchaser for the Offer and the Merger" is
incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS--Background of the Offer and the Merger," "SPECIAL
FACTORS--Recommendation of the Company's Board; Fairness of the Offer and the
Merger," "SPECIAL FACTORS--Opinion of Lazard Freres," "SPECIAL FACTORS--Position
of Viacom Regarding Fairness of the Offer and the Merger" and in Schedule II is
incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The response to Item 6(a) of the Schedule 14D-1 is incorporated
herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The response to Item 7 of the Schedule 14D-1 and the information set forth
in the Offer to Purchase.
5
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE OFFER AND THE MERGER.
(a)-(b) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS--Background of the Offer and the Merger,"
"SPECIAL FACTORS--Recommendation of the Company's Board; Fairness of the Offer
and the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Offer and
the Merger" and "SPECIAL FACTORS--Beneficial Ownership of Common Stock" is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE OFFER AND THE MERGER.
(a) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS--Rights of Stockholders in the Offer and Merger," "SPECIAL FACTORS--The
Merger Agreement" and in Schedule III is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the Offer to Purchase under "THE TENDER
OFFER--Section 7. Certain Information Concerning the Company" is incorporated
herein by reference. In addition, the Company's audited financial statements for
the fiscal years ended December 31, 1997 and December 31, 1998, and the
Company's unaudited financial statements for the three-month periods ended March
31, 1998 and March 31, 1999, are attached to the Offer to Purchase as Schedules
IV and V thereto, respectively.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS--Background of the Offer and the Merger," and "SPECIAL FACTORS--Plans
for the Company After the Offer and the Merger; Certain Effects of the Offer and
the Merger" is incorporated herein by reference.
(b) The response to Item 8 of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 16. ADDITIONAL INFORMATION.
The response to Item 10(f) of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Opinion of Lazard Freres & Co. L.L.C. dated May 14, 1999 (attached as
Schedule II to the Offer to Purchase).*
(b)(2) Presentation of Lazard Freres & Co. L.L.C. dated May 14, 1999.
(c)(1) Agreement and Plan of Merger, dated as of May 17, 1999, among Parent,
Purchaser and the Company.*
(c)(2) Form of Optionholder Agreement dated May 16, 1999 between Parent and
various holders of Options.*
(d)(1) Form of Offer to Purchase dated May 21, 1999.*
6
<PAGE>
(d)(2) Form of Letter of Transmittal.*
(d)(3) Form of Notice of Guaranteed Delivery.*
(d)(4) Form of Letter from VSEG Acquisition Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.*
(d)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.*
(d)(6) Form of Letter to Participants in the Spelling Entertainment Group
Inc. 401(k) Savings Plan.
(d)(7) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.*
(d)(8) Summary Advertisement as published in THE WALL STREET JOURNAL on May
21, 1999.*
(d)(9) Press Release issued by Viacom Inc. on May 17, 1999.*
(e) Section 262 of the Delaware General Corporation Law (attached as
Schedule III to the Offer to Purchase).*
(f) Not applicable.
- ------------------------
* Incorporated by reference to the Statement on Schedule 14D-1 filed by
Parent, Purchaser, and Viacom on May 21, 1999.
7
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
May 21, 1999
<TABLE>
<S> <C> <C>
VIACOM INTERNATIONAL INC.
By: /s/ MICHAEL D. FRICKLAS
-----------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
and General Counsel
</TABLE>
8
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
May 21, 1999
<TABLE>
<S> <C> <C>
VSEG ACQUISITION INC.
By: /s/ MICHAEL D. FRICKLAS
-----------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
and General Counsel
</TABLE>
9
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
May 21, 1999
<TABLE>
<S> <C> <C>
VIACOM INC.
By: /s/ MICHAEL D. FRICKLAS
-----------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
and General Counsel
</TABLE>
10
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
May 21, 1999
<TABLE>
<S> <C> <C>
SPELLING ENTERTAINMENT GROUP INC.
By: /s/ SALLY SUCHIL
-----------------------------------------
Name: Sally Suchil
Title: Senior Vice President
and General Counsel
</TABLE>
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
(a) Not applicable.
(b)(1) Opinion of Lazard Freres & Co. L.L.C. dated May 14, 1999 (attached as Schedule II to the Offer to
Purchase).*
(b)(2) Presentation of Lazard Freres & Co. L.L.C. dated May 14, 1999.
(c)(1) Agreement and Plan of Merger, dated as of May 17, 1999, among Parent, Purchaser and the Company.*
(c)(2) Form of Optionholders Agreement dated May 16, 1999 between Parent and various holders of Options.
(d)(1) Form of Offer to Purchase dated May 21, 1999.*
(d)(2) Form of Letter of Transmittal.*
(d)(3) Form of Notice of Guaranteed Delivery.*
(d)(4) Form of Letter from VSEG Acquisition Inc. to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.*
(d)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients.*
(d)(6) Form of Letter to Participants in the Spelling Entertainment Group Inc. 401(k) Savings Plan.
(d)(7) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.*
(d)(8) Summary Advertisement as published in The Wall Street Journal on May 21, 1999.*
(d)(9) Press Release issued by Viacom Inc. on May 17, 1999.*
(e) Section 262 of the Delaware General Corporation Law (attached as Schedule III to the Offer to
Purchase).*
(f) Not applicable.
</TABLE>
- ------------------------
* Incorporated by reference to the Statement on Schedule 14D-1 filed by
Parent, Purchaser, and Viacom on May 21, 1999.
12
<PAGE>
Exhibit 99(c)
LAZARD FRERES & CO. LLC MAY 14, 1999
CONFIDENTIAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESENTATION TO THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF SPELLING ENTERTAINMENT GROUP INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. PROCESS TO DATE.................................................................................... 1
II. TERMS OF VIACOM'S OFFER............................................................................ 2
III. VALUATION METHODOLOGY.............................................................................. 3
A. Overview
B. Integration Assumptions
C. Specific Business Assumptions
IV. VALUATION SUMMARY.................................................................................. 14
A. Overview
B. Historical and Projected Financial Summary
C. Analysis of Multiples at Various Prices
D. Analysis of Publicly Traded Comparable Companies
E. Analysis of Selected Comparable Acquisitions
F. Discounted Cash Flow Analysis
G. Historical Stock Price Performance
H. Analysis of Premiums Paid in Selected Minority Take-Out Transactions
I. Summary of Previous Sale Processes
</TABLE>
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. I. PROCESS TO DATE
OUR PROCESS TO DATE FOR EVALUATING VIACOM'S OFFER HAS INCLUDED THE FOLLOWING
STEPS:
- - Detailed due diligence with Spelling's senior management regarding historical
and projected operating performance, strategy and perceived elements of value
- - Received limited materials from and held discussions with Viacom and Spelling
regarding previous efforts to sell the Company
- - Analysis of the historical trading patterns of the Company's common stock
- - Evaluation of relevant comparable companies and transactions
- - Creation of a component based discounted cash flow model using ground-up
assumptions provided by the Company.
- - Review of premiums paid in selected minority take-out transactions
-1-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. II. TERMS OF VIACOM'S OFFER
- -------------------------------------------------------------------------------
<TABLE>
($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
PER SHARE EQUITY VALUE(a) ENTERPRISE VALUE
--------- --------------- ----------------
<S> <C> <C> <C>
Stated Price: $9.75 $924 $1,169
Form of Consideration: Cash
Premium to Close the Day before Offer: 44.4%
Premium to Close 30 Days before Offer: 54.5%
MULTIPLE OF ENTERPRISE VALUE TO:
GAAP BASIS(b)
- ----------------------------------------------------
Revenue
1998 $586.1 1.99x
1999E 504.9 2.32
EBITDA
1998(c) $42.2 27.7x
1999E 38.7 30.2
EBIT
1998(c) $32.6 35.9x
1999E 27.3 42.8
CASH BASIS(b)
- ----------------------------------------------------
Cash Flow
1999E ($19.7) NM
2000E 54.5 21.5x
Cash Flow After Taxes
1999E ($22.2) NM
2000E 40.2 29.1x
- ----------------------------------------------------
</TABLE>
(a) Diluted share calculation based on 93.1m shares outstanding and 7.6m options
with a weighted average exercise price of $7.58.
(b) Source: Company estimates.
(c) Excludes one-time gain of $7.0m related to the sale of TeleUno and one-time
loss of $24.0m related to the closure of film and video units.
-2-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
A. OVERVIEW
- - We have used several methodologies to value Spelling. However, due to the
accounting practices of the television production industry and the
cyclicality of the business, traditional EBITDA and Net Income multiples
are not particularly meaningful. As a result, our primary method of
valuation is a component discounted cash flow analysis that considers the
potential annuity value of Spelling's library, the value of ongoing
production and syndication, the value of future programming development and
other assets.
VALUATION METHODOLOGY COMMENT
------------------------------- -----------------------------------------
Public Comparables - Absence of coverage by research
analysts and limited float are
factors that lessen the stock's
attractiveness to public investors
- Few direct comparables due to
Spelling's focus on television
production and its extensive library
- Recent operating performance of
Spelling obscures value of franchise
shows
- Restructuring efforts, including sale
of software businesses and shutdown
of film production, make historical
results less relevant to ongoing
operations
- Our comparables universe consists of
8 television production companies and
6 diversified media companies.
- The television production
companies trade at a median
multiple of 9.6x 1999E EBITDA.
- The diversified media companies
trade at a median multiple of
15.3x of 1999E EBTDA.
-3-
<PAGE>
A. OVERVIEW (CONT'D)
VALUATION METHODOLOGY COMMENT
------------------------------- -----------------------------------------
Acquisition Comparables - 37 selected precedent transactions
since 1989 were reviewed in both
the television production and
movie studio sectors. These
transactions occurred at a median
range of multiples of 11.7x to
18.5x of LTM EBITDA, respectively.
- The usefulness of this methodology
is limited by the lack of
comparability of the transactions
(aside from previous Spelling
transactions) and the vagaries of
entertainment industry accounting
methods
Component Discounted Cash Flow - Using ground-up assumptions
provided by the Company, we
created a cash-basis DCF model
that values separately Spelling's
on-air shows, film and television
libraries, programming under
development, and corporate
overhead
- Sensitivities used were
<TABLE>
<CAPTION>
Discount Perpetuity Growth
Rates Rates
-------- -----------------
<S> <C> <C>
Current Production 9%-12% 0%-3%
Future Production 12%-15% 6%-9%
TV & Film Library 7%-10% (2%)-1%
Corporate Overhead 10%-13% (2%)-1%
</TABLE>
-4-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
B. INTEGRATION ASSUMPTIONS
NOTE: ALL ASSUMPTIONS DESCRIBED IN SECTIONS B THROUGH C WERE PROVIDED BY
SPELLING.
- - To date, Spelling has largely operated as a separate entity from Viacom's
other operations. Opportunities exist to both increase revenue and decrease
costs were Viacom to choose to fully integrate Spelling or allow it full
independence.
- - Closer integration with Viacom would enable Spelling to leverage Paramount's
distribution strength, cut distribution costs, and reduce information
systems, back office and corporate overhead expenses.
- Similar benefits could potentially be realized were Spelling to be
acquired by any of the major integrated studios
- As a result of closer integration, however, Spelling's attractiveness to
talent as an independent, third party production company could be
diminished -- though this is difficult to measure.
- - If fully independent, the Company would consider measures to streamline
operations and enhance revenues such as putting much of its distribution
function out to bid.
- Substantial savings could be realized through the elimination of Spelling
distribution organization but it would need to incur a third-party
distribution fee in the range of 10-12% of gross receipts
-5-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
B. INTEGRATION ASSUMPTIONS (CONT'D)
- - As a result of these varied integration benefits, we have valued the Company
in our DCF methodology according to three operating scenarios provided by
management: status quo, stand-alone and fully integrated.(a)
SCENARIO ASSUMPTIONS
- ---------------------------- --------------------------------------------------
STATUS QUO - Maintenance of existing operations and
infrastructure.
- No further integration with Viacom and no
outsourcing or integration with third parties.
- Base case for assumptions are existing
ultimates and Company projections.
- Some opportunities for overhead cost
reductions.
STAND-ALONE (a) - Rationalization and outsourcing of functions as
appropriate.
- Auction of international and domestic
distribution rights.
- Domestic receipts increase by 5% and
international revenues by 25% due to third
party distribution leverage.
- Domestic corporate distribution overhead
replaced by a fee of 8% of all domestic
receipts (excluding network license and
merchandising fees).
- International corporate distribution overhead
replaced by a fee of 12% of all international
receipts.
- Increase in projected, uncontracted library
receipts of 5% domestically and 15%
internationally.
- Worldvision corporate expenses reduced by $20
million per year.
- Other corporate overhead reduced by $2.0
million per year due to related infrastructure
efficiencies and outsourcing.
- 5% savings on direct distribution costs.
- ----------------------
(a) The stand-alone and fully integrated scenarios were not considered to be
particularly relevant because they were not strategic alternatives made
available by Viacom.
-6-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
B. INTEGRATION ASSUMPTIONS (CONT'D)
SCENARIO ASSUMPTIONS
------------------------ -------------------------------------------------
FULLY INTEGRATED(a) - Replacement of Company's distribution
infrastructure with Paramount's.
- Receipts increase same as under
Stand-Alone scenario.
- Integration with Viacom allows
Worldvision and SEGI corporate expenses
to be reduced by $42 million per year.
- Increase in projected, uncontracted library
receipts of 5% domestically and 15%
internationally.
- No payment of third-party distribution fees
as this would be handled by Viacom rather
than outsourced to a third party.
- Hamilton (licensing and merchandising)
overhead reduced after 1999 due to
integration with Viacom.
- Intangible benefits:
- Greater leverage with networks in
getting shows on the air and subsequent
negotiation for renewal.
- Ability to benefit from bundling
television production with films.
- Improved access to technology and
capital.
--------------------------------
(a) The stand-alone and fully integrated scenarios were not considered to be
particularly relevant because they were not strategic alternatives made
available by Viacom.
-7-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - CURRENT PRODUCTION
<TABLE>
<CAPTION>
TOTAL SYNDICATION CYCLES(a)
FINAL SEASON DOMESTIC(b) INTERNATIONAL COMMENTS
------------ ----------- ------------- -----------------------------------------------------------
<S> <C> <C> <C> <C>
PROGRAM A 99/00 1/4 3 - 1st cycle syndication currently on a broadcast network.
- Sequel valued separately.
- Less attractive for syndication due to serial nature
PROGRAM B 98/99 0/3 3 of the show.
- 1st and 2nd cycle syndication on an independent
PROGRAM C 02/03 1/3 3 network.
- First run cable syndication will coincide with
PROGRAM D 04/05 0/3 3 broadcast barter syndication.
- Value incorporated in library.
PROGRAM E 98/99 0/1 1
- First run cable syndication will coincide with
PROGRAM F 01/02 3/1 3 broadcast barter syndication.
- Company has a right to put the show in syndication to
PROGRAM G 02/03 0/3 3 a basic cable network.
- Continues to be one of the top performing 1st run
PROGRAM H 04/05 1/1 1 syndication programs in history.
PROGRAM I 02/03 1/1 1 - Somewhat less successful than PROGRAM H.
</TABLE>
- ---------------------------
(a) Represents syndication cycles through the life of the show. PROGRAM A AND
PROGRAM B have completed certain syndication cycles.
(b) Broadcast cycles / Cable network cycles
-8-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - PROJECTS IN DEVELOPMENT
- - Rather than value the future projects specifically, we have assumed that
the current slate of pilots is typical of future years in breadth and
quality.
- - We have valued all current and future projects in development using the
following assumptions.
<TABLE>
<CAPTION>
SUCCESS RATES RUN OF
PILOTS PILOTS TO
TYPE OF PROGRAM PER YEAR ORDERS ORDERS TO SERIES SUCCESSFUL SHOW COMMENTS
- ---------------- ----------- ---------- ----------------- --------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sitcom 2.5(a) 29% 20% 7 years - 6% chance of success for a new sitcom pilot
- Network fees begin at $675k/year with
production costs of $1.0 million/year.
- Network domestic syndication fees:
- 1st Cycle: $1.5 million/episode
- 2nd Cycle: $633k/episode
- 3rd Cycle: $500k/episode
- Includes $6 million per year to 2000/2001,
$4 million per year thereafter for
development and writer deals.
</TABLE>
- ---------------------------------
(a) Alternates two in one year followed by three in the next year.
-9-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - PROJECTS IN DEVELOPMENT (CONT'D)
<TABLE>
<CAPTION>
SUCCESS RATES RUN OF
PILOTS PILOTS TO ORDERS TO SUCCESSFUL
TYPE OF PROGRAM PER YEAR ORDERS SERIES SHOW COMMENTS
- ---------------- ---------- ---------- ----------------- --------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
Drama 2.5(a) 43% 50% 7 years - 21% chance of success for a new drama pilot.
- Network fees of $1.0 million/episode
increasing to $2.1 million/episode when
production ends.
- Production costs of $1.5 million/episode
increasing to $2.2 million/episode.
- Three cycles of domestic syndication on cable.
- Domestic syndication fees:
- 1st Cycle: $679K/episode
- 2nd Cycle: $188K/episode
- 3rd Cycle: $94K/episode
- Two years of barter concurrent with 1st cycle
cable syndication.
- Assumes $1.5 million per year for development
and writer deals.
First Run 1.5(b) 50%(c) 60% 5 years - Domestic syndication fees begin at $185K per
Syndication episode rising to $1,300K per episode.
- Approximately $85 million of barter revenue
over life of the show.
</TABLE>
- ----------
(a) Alternates two in one year followed by three in the next year.
(b) Alternates one in one year followed by two in the next year.
(c) Assumes 5 presentations get ordered in a 7-year period.
-10-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - LIBRARY
- - Estimates of library receipts and costs are based on past experience.
- - The library does not include any receipts from shows currently in
production.
- - Marketing and distribution costs are estimated to be 20% of receipts.
-11-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - OTHER ASSETS
- - Movie/Film Production.
- 20 - 25 film projects remaining from Spelling Films. The two most
valuable scripts are currently carried at a book value of
approximately $1.5 million, and we have attributed to them a value of
$2.0 million realized in 2001.
- The Company estimates it will produce one Movie of the Week every two
years, each with a value of $0.5 million, beginning in 2000.
- - Sequel to PROGRAM A
- Spelling has had a sequel to PROGRAM A under development for a number
of years.
- A broadcast network has expressed a clear desire to order the new
show; alternatively, other networks have demonstrated an interest in
the brand.
- The Company believes that receipts from such a show would be
comparable to the original PROGRAM A, while production costs would be
significantly lower.
- We have valued the show assuming a successful 7 year run beginning in
2000/2001 on a broadcast network with full domestic and international
syndication.
- Our present value range for the sequel is $50 million - $80 million
based on discount rates of 12% to 15% and perpetuity growth rates of
(2%) to 2%.
- - Other
- Proceeds in each of 1999 and 2000 of $5 million from the sale of land
in conjunction with the wind-up of Charter.
-12-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. III. VALUATION METHODOLOGY
- --------------------------------------------------------------------------------
C. SPECIFIC BUSINESS ASSUMPTIONS - CORPORATE OVERHEAD
- - Corporate overhead generally grows 3% per year.
- - In 2001, there is a one-time savings of $3.0 million from reductions in IT
staff and equipment costs after increases in preparation for Y2K.
- - Corporate capital expenditures, primarily for IT, are approximately $2.0
million through 2000, $0.5 million in 2001/2002 and $1.0 million per year
thereafter.
- - Cost reductions in 2002 associated with the realignment of senior
management and associated reduction in production costs.
- - Reduction of certain costs at Worldvision and rationalization of tax and
human resource departments over time.
- - Further elimination of overhead costs in 2003 due to the winding up of
certain businesses and liabilities.
- - Taxes
- Effective 22% federal and 2% state tax rate applied to cash flow after
participations and overhead.
- 4% international tax credited against domestic cash flow.
-13-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
A. OVERVIEW
($ IN MILLIONS EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
VALUATION RANGE
--------------------------------------------
EQUITY VALUE
ENTERPRISE VALUE PER SHARE(a)
---------------- -----------------
METHODOLOGY LOW HIGH LOW HIGH COMMENT
- ------------------------------------ ------- ------ ----- ------ -----------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT TRADING LEVEL (3/18/99)(b) $872 $6.75 - Assumes net debt as of 6/30/99 of $245
million.
52 WEEK RANGE $798 $1,144 $6.00 $9.50
PUBLIC COMPARABLES
Without Overhead $830 $1,325 $6.30 $11.30 - Based on 1999E EBITDA multiple range of
9.6x to 15.3x.
With Overhead 370 595 1.35 3.75
ACQUISITION COMPARABLES
Without Overhead $1,065 $1,680 $8.70 $14.80 - Based on LTM EBITDA transaction
multiples of 11.7x to 18.5x.
With Overhead 495 780 2.70 5.75
COMPONENT DISCOUNTED CASH FLOW
Status Quo Scenario $940 $1,210 $7.60 $10.50 - Value as of 6/30/99
Stand-Alone Scenario 1,030 1,305 8.60 11.55 - Assumes net debt as of 6/30/99 of $245
million.
Fully Integrated Scenario 1,390 1,740 12.45 16.20
</TABLE>
- ----------------------
(a) Diluted share calculation based on 93.1m shares outstanding and 7.6m
options with a weighted average exercise price of $7.58.
(b) Share price as of 3/18/99, the day prior to the initial Viacom offer of
$9.00 per share in cash.
-14-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
B. HISTORICAL AND PROJECTED FINANCIAL SUMMARY
GAAP BASIS
($ IN MILLIONS)
<TABLE>
<CAPTION>
ANALYST COMPANY
FISCAL YEAR ENDED DECEMBER 31,(a) PROJECTIONS(b) PROJECTIONS
1995A 1996A 1997A 1998A 1999E 1999E
<S> <C> <C> <C> <C> <C> <C>
REVENUES $452.2 $497.6 $564.2 $586.1 $637.0 $504.9
GROWTH 8.6% 10.1% 13.4% 3.9% 8.7% (13.9%)
EBITDA BEFORE S,G&A $118.0 $83.8 $59.7 $90.9 NA $86.4
GROWTH 39.2% (29.0%) (28.7%) 52.2% (4.9%)
MARGIN 26.1% 16.8% 10.6% 15.5% (17.1%)
EBITDA $74.0 $32.4 $10.2 $42.2(c) $5.0 $38.7
GROWTH 56.4% (56.2%) (68.5%) 313.1% (88.1%) (8.2%)
MARGIN 16.4% 6.5% 1.8% 7.2% 0.8% 7.7%
EBIT $66.3 $23.8 $1.1 $32.6(c) NA $27.3
GROWTH 64.0% (64.1%) (95.6%) 32.6 (16.3%)
MARGIN 14.7% 4.8% 0.2% 5.6% 5.4%
NET INCOME $34.1 $4.1 ($12.3) $3.6 NA ($3.2)
GROWTH 75.7% (88.1%) NM NM (17.8%)
MARGIN 7.5% 0.8% NM 0.6% 0.5%
</TABLE>
- ------------------
Note: Actual historicals - not pro forma for sale of assets or discontinued
operations.
(a) Source: Company. Represents reported figures.
(b) Source: Analyst Research.
(c) Excludes one-time gain of $7.0m related to the sale of TeleUno and one-time
loss related to the closure of film and video units.
-15-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
B. HISTORICAL AND PROJECTED FINANCIAL SUMMARY(a)(CONT'D)
CASH BASIS -- STATUS QUO SCENARIO
($ IN MILLIONS)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
--------------------------------------------------------------------------------------
1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E
------- ------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flow from Current Production (b) $ 30.8 121.2 166.5 173.5 185.2 118.6 92.8 62.1 45.5
Cash Flow from Library 56.7 56.5 49.4 52.2 54.1 69.7 40.1 41.4 43.1
Cash Flow from Projected Production(b) (33.5) (50.9) (30.5) (30.7) 2.2 66.8 59.9 111.1 68.1
------- ------ ------- ------- ------- ------- ------- ------- -------
Cash Flow Before Overhead 53.9 126.8 185.4 195.0 241.5 255.0 192.8 214.6 156.7
Less: Overhead (c) (73.7) (72.3) (68.9) (67.6) (62.0) (63.9) (65.8) (67.7) (69.7)
------- ------ ------- ------- ------- ------- ------- ------- -------
Cash Flow Before Taxes 19.7 54.5 116.5 127.4 179.5 191.1 127.1 146.9 87.0
Less: Taxes (2.5) (14.3) (27.5) (30.4) (43.1) (46.2) (31.8) (36.7) (22.4)
------- ------ ------- ------- ------- ------- ------- ------- -------
Net Cash Flow ($ 22.2) $ 40.2 $ 89.0 $ 97.1 $ 136.3 $ 144.9 $ 95.2 $ 110.2 $ 64.6
------- ------ ------- ------- ------- ------- ------- ------- -------
</TABLE>
- ----------
(a) Source: Company.
(b) Cash flow after participations.
(c) Overhead includes corporate capital expenditures (other services and
information services).
-16-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
B. HISTORICAL AND PROJECTED FINANCIAL SUMMARY (a) (CONT'D)
CASH BASIS -- STAND--ALONE SCENARIO
($ IN MILLIONS)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
-------------------------------------------------------------------------------
1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E
------- ----- ----- ----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flow from Current Production (b) $ 31.1 115.2 156.1 165.2 177.4 111.0 88.3 59.5 42.9
Cash Flow from Library 58.9 60.1 53.0 55.9 57.6 73.5 43.8 45.2 47.0
Cash Flow from Projected Production(b) (32.3) (49.0) (29.7) (31.5) 0.4 61.9 57.4 104.2 64.5
------- ----- ----- ----- ----- ----- ----- ------ -----
Cash Flow Before Overhead 57.7 126.3 179.3 189.6 235.4 246.4 189.5 208.9 154.4
Less: Overhead (c) (51.9) (51.0) (50.9) (52.5) (46.5) (47.8) (49.3) (50.7) (52.2)
------- ----- ----- ----- ----- ----- ----- ------ -----
Cash Flow Before Taxes 5.8 75.4 128.3 137.1 189.0 198.6 140.3 158.2 102.3
Less: Taxes (3.3) (18.9) (30.2) (32.6) (45.3) (48.0) (34.9) (39.4) (26.0)
------- ----- ----- ----- ----- ----- ----- ------ -----
Net Cash Flow 2.5 56.4 98.1 104.5 143.6 150.6 105.4 118.8 76.3
------- ----- ----- ----- ----- ----- ----- ------ -----
------- ----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
- ----------
(a) Source: Company.
(b) Cash flow after participations
(c) Overhead includes corporate capital expenditures (other services and
information services.)
-17-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
B. HISTORICAL AND PROJECTED FINANCIAL SUMMARY (a) (CONT'D)
CASH BASIS -- FULLY INTEGRATED SCENARIO
($ IN MILLIONS)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
------------------------------------------------------------------------------
1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E
------ ----- ----- ----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flow from Current Production (b) 47.8 138.8 184.9 195.1 202.6 127.7 100.7 67.4 49.3
Cash Flow from Library 58.9 60.1 53.0 55.9 57.6 73.5 43.8 45.2 47.0
Cash Flow from Projected Production(b) (31.9) (46.3) (25.9) (20.8) 11.0 86.5 75.0 134.5 83.0
------ ----- ----- ----- ----- ----- ----- ------ -----
Cash Flow Before Overhead 74.9 152.6 211.9 230.2 271.3 287.7 219.4 247.1 179.4
Less: Overhead (c) (34.3) (32.8) (32.3) (33.2) (26.7) (27.4) (28.2) (29.0) (29.9)
------ ----- ----- ----- ----- ----- ----- ------ -----
Cash Flow Before Taxes 40.6 119.7 179.7 197.0 244.6 260.3 191.2 218.1 149.5
Less: Taxes (10.9) (28.7) (41.5) (45.8) (57.6) (61.6) (46.1) (52.5) (36.3)
------ ----- ----- ----- ----- ----- ----- ------ -----
Net Cash Flow 29.7 91.0 138.1 151.2 187.0 198.7 145.1 165.5 113.1
------ ----- ----- ----- ----- ----- ----- ------ -----
------ ----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
- ----------
(a) Source: Company
(b) Cash flow after participations
(c) Overhead includes corporate capital expenditures (other services and
information services.)
-18-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
B. HISTORICAL AND PROJECTED FINANCIAL SUMMARY (a) (CONT'D)
BALANCE SHEET
($ IN MILLIONS)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
----------------------------------------------------
1995A 1996A 1997A 1998A 3/31/99A
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current $ 387.3 $ 345.2 $ 356.3 $ 391.4 $ 363.9
Entertainment Product Costs 123.3 182.8 127.9 145.6 145.5
Other 446.3 312.4 289.3 236.0 249.6
-------- -------- -------- -------- --------
TOTAL ASSETS 956.8 840.3 773.6 772.9 759.2
LIABILITIES
Current 98.2 112.8 113.7 166.6 146.2
Viacom Debt 210.0 315.0 289.0 239.9 231.0
Other 90.1 92.8 99.8 95.2 105.6
-------- -------- -------- -------- --------
Total Liabilities 398.3 520.6 502.6 501.7 482.8
EQUITY 558.5 319.7 271.0 271.2 276.4
TOTAL LIABILITIES AND EQUITY $ 956.8 $ 840.3 $ 773.6 $ 772.9 $ 759.2
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ----------
(a) Source: Company
-19-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
C. ANALYSIS OF MULTIPLES AT VARIOUS PRICES
($ IN MILLIONS EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
SHARE PRICE $9.00 $9.25 $9.50 $9.75 $10.00 $10.25
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUM TO MARKET @ 3/18/99 (A) $6.75 33.3% 37.0% 40.7% 44.4% 48.1% 51.9%
ONE WEEK PRIOR TO OFFER 6.81 32.1% 35.8% 39.4% 43.1% 46.8% 50.5%
4 WEEKS PRIOR TO OFFER 6.31 42.6% 46.5% 50.5% 54.5% 58.4% 62.4%
EQUITY VALUE $849.6 $874.4 $899.2 $924.1 $948.9 $973.8
ENTERPRISE VALUE $1094.6 $1119.4 $1144.2 $1169.1 $1193.9 $1218.8
ENTERPRISE VALUE AS MULTIPLE OF:
1999E REVENUE
Analyst Projections $637.0 1.72x 1.76x 1.80x 1.84x 1.87x 1.91x
Company Projections 504.9 2.17 2.22 2.27 2.32 2.36 2.41
1999E EBITDA
Analyst Projections $5.0 NM NM NM NM NM NM
Company Projections 38.7 28.3x 28.9x 29.6x 30.2x 30.9x 31.5x
1999E PRE-TAX CASH FLOW (c)
Status Quo (b) ($19.7) NM NM NM NM NM NM
Stand-Alone (b) 5.8 188.2x 192.5x 196.7x 201.0x 205.3x 209.6x
Fully-Integrated (b) 40.6 26.9 27.6 28.2 28.8 29.4 30.0
2000E PRE-TAX CASH FLOW (c)
Status Quo (b) $54.5 20.1x 20.5x 21.0x 21.5x 21.9x 22.4x
Stand-Alone (b) 75.4 14.5 14.9 15.2 15.5 15.8 16.2
Fully-Integrated (b) 119.7 9.1 9.3 9.6 9.8 10.00 10.2
</TABLE>
- ----------
(a) Day prior to announcement of Viacom's public offer for its remaining
interest in Spelling
(b) Based on Company estimates
(c) Cash flow after participations and corporate overhead
-20-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
D. ANALYSIS OF PUBLICLY TRADED COMPARABLE COMPANIES
($ IN MILLIONS EXCEPT PER SHARE VALUES)
PRICES AS OF 05/13/99, EXCEPT FOR SPELLING, WHICH IS AS OF THE DAY PRIOR TO THE
DATE OF THE INITIAL VIACOM OFFER
<TABLE>
<CAPTION>
Market Capitalization/
-----------------------------------------------------------------------
Sales EBITDA EBIT 1999E I/B/E/S
Market Market ---------------------- ---------------------- ----------------------- EBITDA 5-Year
Value Cap. 1998E 1999E 2000E 1998E 1999E 2000E 1998E 1999E 2000E Margin Growth
----- ---- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spelling (a) $627 $872 1.49x 1.37x 1.24x 20.7x NM 51.3x 26.7x NA NA 7.2% NA
Television and Film Production
Alliance $465 $911 1.45x 1.21x NA 19.8x 9.6x NA 23.5x 11.1x NA 7.3% 15.0%
Atlantic
Cinar Films 795 762 7.37 (c) 5.29 4.18 28.0 19.0 14.9 NM 22.0 16.9 26.3% 30.0%
Dick Clark 102 58 0.65 (c) NA NA 4.2 (c) NA NA 5.1 (c) NA NA 15.4% NA
Endemol 1,103 1,111 2.85 2.45 2.31 17.8 15.0 14.0 21.0 17.4 16.0 15.8% 16.0%
King World (b) 2,317 1,630 2.28 2.03 1.86 8.7 7.7 7.0 8.8 7.8 7.1 26.1% 10.0%
Kushner-Locke 179 240 3.44 NA NA 11.0 NA NA 11.3 NA NA 31.4% NA
Nelvana 137 144 2.93 2.17 NA 12.0 9.5 NA 14.0 10.8 NA 24.3% NA
Trimark 160 220 2.47 NA NA 41.4 (c) NA NA 45.0 (c) NA NA 6.0% NA
---------------------------------------------------------------------------------------
High 3.44x 5.29x 4.18x 28.0x 19.0x 14.9x 23.5x 22.0x 16.9x
Low 1.45 1.21 1.86 8.7 7.7 7.0 8.8 7.8 7.1
Median 2.66 2.17 2.31 14.9 9.6 14.0 14.0 11.1 16.0
---------------------------------------------------------------------------------------
</TABLE>
NOTE: SPELLING ENTERTAINMENT NOT INCLUDED IN SUMMARY STATISTICS
DIVERSIFIED MEDIA
<TABLE>
<CAPTION>
Market Capitalization/
-------------------------------------------------------------------------
Sales EBITDA EBIT 1999E I/B/E/S
Market Market --------------------- --------------------- -------------------------- EBITDA 5-Year
Value Cap. 1998E 1999E 2000E 1998E 1999E 2000E 1998E 1999E 2000E Margin Growth
------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOX $20,650 $17,707 2.40X 2.24X 2.09X 18.3X 16.3x 14.6x 25.3x 22.5x 19.7x 13.1% 27.0%
MGM 1,164 2,246 2.49 1.52 1.39 NM 12.5 11.1 NM 21.2 17.4 NM NM
Seagram 24,188 28,804 2.10 1.97 1.80 18.8 17.2 14.6 62.6 (c) 47.4 (c) 27.7 11.1% 15.0%
Time Warner 94,821 99,443 3.71 3.47 3.15 19.3 17.4 15.4 NA NA NA 19.2% 12.0%
Viacom 29,385 31,027 2.48 2.39 2.17 15.8 14.4 12.8 29.2 22.4 19.2 15.7% 20.0%
Walt Disney 61,640 73,378 3.06 2.76 2.50 14.8 13.6 12.5 19.6 17.5 15.7 20.7% 16.4%
High 3.71x 3.47x 3.15x 19.3x 17.4x 15.4x 29.2x 22.5x 27.7x
Low 2.10 1.52 1.39 14.8 12.5 11.1 19.6 17.5 15.7
Median 2.48 2.31 2.13 18.3 15.3 13.7 25.3 21.8 19.2
</TABLE>
- ----------
(a) Source: Analyst Research
(b) King World valuation as of 3/31/99, the day prior to the announcement of
CBS transaction
(c) Excluded from summary statistics
-21-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS
<TABLE>
<CAPTION>
LTM LTM
SPELLING TRANSACTIONS(a) SALES EBITDA
(ACQUIRER/TARGET) DATE % PREMIUM(b) MULTIPLE(c) MULTIPLE(c)
- ------------------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Blockbuster/Spelling 9/13/93 (1.6%) 1.63x 10.9x
Blockbuster/Spelling 7/1/93 23.9% 1.91 11.8
Blockbuster/Spelling 3/8/93 (5.7%) 1.47 10.9
Charter Co./Spelling 2/6/92 (7.9%) 1.74 12.2
Charter Co./Spelling 4/19/91 18.1% 1.54 11.6
Charter Co./Spelling 4/5/91 20.0% 1.49 11.2
------------------------------------------------------------
HIGH 1.91x 12.2x
LOW 1.47 10.9
MEDIAN 1.59 11.6
------------------------------------------------------------
</TABLE>
- -----------------
(a) The transactions represent acquisition of minority interests over time.
Multiples calculated as if 100% had been acquired.
(b) Premium to share price one week prior to announcement.
(c) Based on implied transaction value.
-22-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
TELEVISION
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
04/1/99 CBS Inc./King World Productions Inc. Produces and distributes first run $1,902
syndicated television programming
01/19/99 Carlton Communication plc/ITC Library Television and film library including about 150
(Universal Studios) 200 films and 9000 hours of television
programming.
10/13/98 Investors/Live Entertainment Division Provides television production services. 91
(Endemol Entertainment Holdings NV)
9/29/98 Kingfisher plc/VCI plc Provides video and music production 79
services; publishes books.
05/05/98 CanWest Global Comm./Fireworks Ent. Provides film and television production, 32
distribution and financing services.
10/20/97 HSN/Television assets of Universal Studios, Assets includes all domestic operations, 50% 4,075
Inc. (Seagram Co.) of international operations of USA Networks;
Sci-Fi Network, and Universal Television's
U.S. production and distribution operations
10/09/97 Pearson plc/All American Comm. Distributor of syndicated game shows. 509
6/24/97 Granada Group plc/Yorkshire Holdings plc Producer and broadcaster television 1,129
programming; sells television advertising
04/18/97 Richland Gordon/Live Entertainment Domestic and international marketing and 136
distribution of filmed entertainment.
11/25/96 Carlton Comm. plc/Action Time Produces and licenses game shows and other 12
original entertainment and lifestyle
programs.
10/31/96 Cinar Animation/FilmFair UK-based puppet and clay animation studio. 17
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
04/1/99 CBS Inc./King World Productions Inc. 2.7x 10.3x
01/19/99 Carlton Communication plc/ITC Library NA NA
(Universal Studios)
10/13/98 Investors/Live Entertainment Division NA NA
(Endemol Entertainment Holdings NV)
9/29/98 Kingfisher plc/VCI plc 0.5(a) 9.9
05/05/98 CanWest Global Comm./Fireworks Ent. 1.1 10.2
10/20/97 HSN/Television assets of Universal Studios, 3.3 16.9(b)
Inc. (Seagram Co.)
10/09/97 Pearson plc/All American Comm. 2.2 11.3
6/24/97 Granada Group plc/Yorkshire Holdings plc 2.5 20.5
04/18/97 Richland Gordon/Live Entertainment 0.9 18.3
11/25/96 Carlton Comm. plc/Action Time 0.8 9.8
10/31/96 Cinar Animation/FilmFair 9.4(a) 14.0
</TABLE>
- ---------------------
(a) Excluded from summary statistics.
(b) Based on 1998E EBITDA.
-23-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
TELEVISION (CONT'D)
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
08/20/96 Golden Books/Broadway Video Entertainment Family video library including "Rudolph the $91
Red-Nosed Reindeer" and "Lassie."
10/12/95 All American Comm./Mark Goodson Productions Television production; owner of 36 TV game 87
shows.
09/18/95 Pearson plc/ACI US distributor of made-for-television movies. 40
03/01/95 Pearson plc/Grundy Worldwide Television programming including the 258
Australian-based series NEIGHBOURS as
well as game shows and daily drama
shows.
04/26/94 Hallmark/RHI Entertainment Produces movies of the week and mini-series 401
primarily for domestic network and cable
television.
12/01/93 Turner Broadcasting/Hanna-Barbera Animation production company. Characters 258
include THE FLINTSTONES and YOGI BEAR.
09/08/93 Blockbuster/Spelling Entertainment Provides filmed entertainment production and 430(b)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
07/01/93 Blockbuster/Spelling Entertainment Provides filmed entertainment production and 467(b)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
03/03/93 Blockbuster/Spelling Entertainment Provides filmed entertainment production and 380(b)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
08/20/96 Golden Books/Broadway Video Entertainment 7.4x(a) 13.6x
10/12/95 All American Comm./Mark Goodson Productions 2.6 11.1
09/18/95 Pearson plc/ACI 1.3 NA
03/01/95 Pearson plc/Grundy Worldwide 3.0 12.8
04/26/94 Hallmark/RHI Entertainment 3.4 21.8
12/01/93 Turner Broadcasting/Hanna-Barbera 1.8 15.8
09/08/93 Blockbuster/Spelling Entertainment 1.6 10.9
07/01/93 Blockbuster/Spelling Entertainment 1.9 11.8
03/03/93 Blockbuster/Spelling Entertainment 1.5 10.9
</TABLE>
- -----------------------------------
(a) Excluded from summary statistics.
(b) Implied enterprise value based on the percentage acquired by Blockbuster.
-24-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
TELEVISION (CONT'D)
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
02/06/92 Charter Co./Spelling Entertainment Provides filmed entertainment production and $297 (a)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
04/19/91 Charter Co./Spelling Entertainment Provides filmed entertainment production and 255(a)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
04/05/91 Charter Co./Spelling Entertainment Provides filmed entertainment production and 248(a)
distribution services, supported by a
library of television series, feature films,
television movies, mini-series, and specials.
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
02/06/92 Charter Co./Spelling Entertainment 1.7x 12.2x
04/19/91 Charter Co./Spelling Entertainment 1.5 11.6
04/05/91 Charter Co./Spelling Entertainment 1.5 11.2
------------------------------------------
HIGH 3.4x 21.8x
LOW 0.8 9.8
MEDIAN 1.8 11.7
------------------------------------------
</TABLE>
- ---------------------------
(a) Implied enterprise value based on the percentage acquired by Charter Co.
-25-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
MOVIE STUDIOS
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
4/7/99 USA Networks/October Films & other PolyGram Assets include: October Films, Gramercy $150-300(a)
Filmed Entertainment (PFE) assets Pictures, PolyGram Video, PFE Canada,
(Universal) certain PFE domestic production deals
including Interscope Communications and
Propaganda Films.
6/4/98 Lions Gate Entertainment Corp./ Provides motion picture production and 26
International Movie Group, Inc. distribution services.
12/3/97 PolyGram NV/Epic Film Library Provides motion picture library services 225
(1,051 film titles).
04/28/97 MGM/Metromedia Film and television library, consisting of 573
2,200 titles; film and television production
and distribution, which include the
operation of Orion Pictures Corp., Goldwyn
Entertainment Co. and Motion Picture Corp.
of America.
07/16/96 Investors/Metro-Goldwyn-Mayer Film and television production including an 1,300
extensive film library, with titles
including James Bond, Rocky, and the
Pink Panther; home video; animation; and
interactive games.
07/02/96 Metromedia/Samuel Goldwyn Motion picture and television services for 135
theatrical and television releases.
08/30/95 Time Warner/Turner Television broadcasting & programming: owns 11,561
and operates WTBS, a television station in
Atlanta, and a 24-hour news service through
Cable News Network; New Line Pictures.
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
4/7/99 USA Networks/October Films & other PolyGram NA NA
Filmed Entertainment (PFE) assets
6/4/98 Lions Gate Entertainment Corp./ NA NA
International Movie Group, Inc.
12/3/97 PolyGram NV/Epic Film Library NA NA
04/28/97 MGM/Metromedia 3.7x NM
07/16/96 Investors/Metro-Goldwyn-Mayer 1.5 NM
07/02/96 Metromedia/Samuel Goldwyn 1.3 NM
08/30/95 Time Warner/Turner 3.0 26.2x
</TABLE>
- -----------
(a) Publicly speculated range.
-26-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
MOVIE STUDIOS (CONT'D)
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
04/09/95 Seagram/MCA Production & distribution of theatrical, TV $7,130
and home video products; motion picture
studio tour operations; licensing of
merchandising rights & film property publishing
rights; manufacturing & distribution of recorded
music; music publishing; operation of
amphitheaters; manufacture & licensing of
concerts & sports merchandising; cable TV
network.
09/10/93 Viacom/Paramount Entertainment and publishing; production, 10,480
financing and distribution of motion
pictures, television programming and
prerecorded videocassettes; operation of
motion pictures, theatres, independent
television stations; theme parks & Madison
Square Garden
08/17/93 Turner/New Line Cinema Video production and publishing. 510
11/26/90 Matsushita/MCA Production and distribution of theatrical, 7,211
non-theatrical, TV and home video products;
motion picture studio tour operations;
licensing of merchandising rights;
manufacture and distribution of recorded
music, music publishing; concerts; book
publishing; television broadcasting;
cable TV network; recreation services
and real estate.
09/25/89 Sony/Columbia Pictures Entertainment Production, worldwide distribution and 4,713
exploitation of feature-length motion
pictures and television programs and the
theatrical exhibition of motion pictures.
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
04/09/95 Seagram/MCA 1.5x 13.4x
09/10/93 Viacom/Paramount 2.3 18.5
08/17/93 Turner/New Line Cinema 1.7 30.4
11/26/90 Matsushita/MCA 1.8 15.8
09/25/89 Sony/Columbia Pictures Entertainment 3.0 21.5
</TABLE>
-27-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
E. ANALYSIS OF SELECTED COMPARABLE ACQUISITIONS (CONT'D)
($ IN MILLIONS)
MOVIE STUDIOS (CONT'D)
<TABLE>
<CAPTION>
ENTERPRISE
DATE VALUE
ANNOUNCED ACQUIROR/TARGET DESCRIPTION OF TARGET ($ IN MILLIONS)
- ------------ -------------------------------------------- --------------------------------------- ---------------------
<S> <C> <C> <C>
06/16/89 Time/Warner Entertainment/communications business, $14,857
including recorded music and music
publishing, motion pictures, cable
television and magazine distribution.
</TABLE>
<TABLE>
<CAPTION>
MULTIPLE OF
DATE LTM LTM
ANNOUNCED ACQUIROR/TARGET REVENUE EBITDA
- ------------ -------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
06/16/89 Time/Warner 2.6x 14.9x
-------------------------------- ---------------
HIGH 3.7x 30.4x
LOW 1.3 13.4
MEDIAN 2.1 18.5
-------------------------------- ---------------
</TABLE>
-28-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
F. DISCOUNTED CASH FLOW ANALYSIS
STATUS QUO SCENARIO
($ IN MILLIONS EXCEPT PER SHARE VALUES)
ENTERPRISE VALUE OF VARIOUS SEGMENTS
<TABLE>
<CAPTION>
Current Production Projected Production
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate 0.0% 1.0% 2.0% 3.0% Rate 6.0% 7.0% 8.0% 9.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9% $ 934.0 $ 967.1 $1,009.7 $1,066.5 12.0% $ 495.7 $ 592.6 $ 738.1 $ 980.5
10% 869.2 893.9 924.9 964.7 13.0% 395.0 459.8 550.5 686.5
11% 814.3 833.2 856.3 885.2 14.0% 320.3 365.8 426.5 511.4
12% 766.9 781.6 799.3 821.0 15.0% 263.1 296.2 338.8 395.6
-------------------------------------- --------------------------------------
<CAPTION>
Library Corporate Overhead
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate (2.0%) (1.0%) 0.0% 1.0% Rate (2.0%) (1.0%) 0.0% 1.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7% $ 588.6 $ 624.6 $ 671.0 $ 732.8 10.0% ($ 870.4) ($ 904.6) ($ 945.6) ($ 995.7)
8% 531.9 558.8 592.4 635.6 11.0% (801.5) (828.5) (860.4) (898.7)
9% 485.4 505.9 531.0 562.4 12.0% (742.4) (764.0) (789.3) (819.1)
10% 446.5 462.5 481.7 505.1 13.0% (691.2) (708.7) (728.9) (752.6)
-------------------------------------- --------------------------------------
</TABLE>
IMPLIED SHARE PRICE ANALYSIS
<TABLE>
<CAPTION>
PV of
Less: Other
Combined Enterprise Value Net Debt (a) Assets (b) Equity Value
-------------------------------------- ------------ ---------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,147.7 $1,279.7 $1,473.2 $1,784.1 ($ 245.0) $ 11.7 $ 914.4 $1,046.4 $1,239.9 $1,550.8
994.5 1,084.0 1,207.4 1,388.1 (245.0) 11.5 761.1 850.5 973.9 1,154.7
877.6 940.9 1,024.6 1,139.9 (245.0) 11.4 644.0 707.2 790.9 906.3
785.3 831.6 890.9 969.1 (245.0) 11.2 551.6 597.9 657.1 735.4
-------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Implied Share Price (c)
--------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.64 $ 10.96 $ 12.88 $ 15.97
--------
8.10 9.00 10.48 12.42
-------- --------
6.93 7.61 8.51 9.75
--------
5.93 6.43 7.07 7.91
--------------------------------------
</TABLE>
- ------------------------
(a) Projected net debt as of 6/30/99; source: Company.
(b) Present value of cash from sale of Spelling real estate, future film
projects and movie of the week productions.
(c) Diluted shares, based on the treasury method, include 93.1m primary shares
including 7.6m options with an average weighted exercise price of $7.58.
-29-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
F. DISCOUNTED CASH FLOW ANALYSIS (CONT'D)
STAND-ALONE SCENARIO
($ IN MILLIONS EXCEPT PER SHARE VALUES)
ENTERPRISE VALUE OF VARIOUS SEGMENTS
<TABLE>
<CAPTION>
Current Production Projected Production
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate 0.0% 1.0% 2.0% 3.0% Rate 6.0% 7.0% 8.0% 9.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9% $ 885.3 $ 916.5 $ 956.7 $1,010.3 12.0% $ 464.6 $ 556.4 $ 694.2 $ 923.9
10% 824.1 847.4 876.6 914.1 13.0% 369.3 430.7 516.6 645.6
11% 772.1 790.0 811.8 839.1 14.0% 298.8 341.9 399.3 479.8
12% 722.3 741.2 757.9 778.3 15.0% 244.6 276.0 316.4 370.2
-------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Library Corporate Overhead
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate (2.0%) (1.0%) 0.0% 1.0% Rate (2.0%) (1.0%) 0.0% 1.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7% $ 634.7 $ 674.0 $ 724.6 $ 792.0 10.0% ($ 736.3) ($ 765.3) ($ 800.0) ($ 842.5)
8% 573.1 602.4 639.1 686.2 11.0% (677.6) (700.5) (727.6) (760.1)
9% 522.6 545.0 572.3 606.6 12.0% (627.3) (645.7) (667.1) (692.4)
10% 480.4 497.8 518.7 544.3 13.0% (583.7) (598.6) (615.7) (635.8)
-------------------------------------- --------------------------------------
</TABLE>
IMPLIED SHARE PRICE ANALYSIS
<TABLE>
<CAPTION>
PV of
Less: Other
Combined Enterprise Value Net Debt (a) Assets (b) Equity Value
-------------------------------------- ------------ ---------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,248.3 $1,381.7 $1,575.5 $1,883.7 ($ 245.0) $ 11.7 $1,014.9 $1,148.4 $1,342.2 $1,650.4
1,088.8 1,180.0 1,304.7 1,485.8 (245.0) 11.5 855.4 946.6 1,071.3 1,252.4
966.2 1,031.2 1,116.4 1,233.0 (245.0) 11.4 732.6 797.5 882.8 999.4
868.7 916.5 977.3 1,057.1 (245.0) 11.2 634.9 682.8 743.6 823.3
-------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Implied Share Price (c)
--------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.65 $ 11.97 $ 13.90 $ 16.96
--------
9.05 9.97 11.52 13.47
-------- --------
7.88 8.58 9.50 10.75
--------
6.83 7.35 8.00 8.86
--------------------------------------
</TABLE>
- ------------------------
(a) Projected net debt as of 6/30/99; source: Company.
(b) Present value of cash from sale of Spelling real estate, future film
projects and movie of the week productions.
(c) Diluted shares, based on the treasury method, include 93.1m primary shares
including 7.6m options with an average weighted exercise price of $7.58.
-30-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
F. DISCOUNTED CASH FLOW ANALYSIS (CONT'D)
FULLY INTEGRATED SCENARIO
($ IN MILLIONS EXCEPT PER SHARE VALUES)
ENTERPRISE VALUE OF VARIOUS SEGMENTS
<TABLE>
<CAPTION>
Current Production Projected Production
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate 0.0% 1.0% 2.0% 3.0% Rate 6.0% 7.0% 8.0% 9.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9% $1,035.0 $1,070.9 $1,117.0 $1,178.5 12.0% $ 650.3 $ 768.6 $ 946.0 $1,241.7
10% 964.4 991.2 1,024.7 1,067.8 13.0% 526.3 605.4 716.0 882.0
11% 904.6 925.1 950.1 981.4 14.0% 434.2 489.7 563.7 667.3
12% 852.9 868.8 888.0 911.4 15.0% 363.4 403.8 455.8 525.1
-------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Library Corporate Overhead
-------------------------------------- --------------------------------------
Perpetuity Growth Perpetuity Growth
Discount -------------------------------------- Discount --------------------------------------
Rate (2.0%) (1.0%) 0.0% 1.0% Rate (2.0%) (1.0%) 0.0% 1.0%
- -------- -------------------------------------- -------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7% $ 634.7 $ 674.0 $ 724.6 $ 792.0 10.0% ($ 647.1) ($ 671.6) ($ 701.1) ($ 737.1)
8% 573.1 602.4 639.1 636.2 11.0% (596.4) (615.8) (638.8) (666.3)
9% 522.6 545.0 572.3 606.6 12.0% (552.9) (568.5) (586.6) (608.0)
10% 480.4 497.8 518.7 544.3 13.0% (515.1) (527.7) (542.3) (559.3)
-------------------------------------- --------------------------------------
</TABLE>
IMPLIED SHARE PRICE ANALYSIS
<TABLE>
<CAPTION>
PV of
Less: Other
Combined Enterprise Value Net Debt (a) Assets (b) Equity Value
-------------------------------------- ------------ ---------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,672.9 $1,841.8 $2,086.5 $2,475.2 ($ 245.0) $ 11.7 $1,439.6 $1,608.5 $1,853.2 $2,241.8
1,467.4 1,583.2 1,741.1 1,969.8 (245.0) 11.5 1,234.0 1,349.8 1,507.7 1,736.4
1,308.5 1,391.3 1,499.6 1,647.3 (245.0) 11.4 1,074.9 1,157.7 1,266.0 1,413.6
$1,181.5 $1,242.7 $1,320.2 $1,421.5 (245.0) $ 11.2 947.8 1,009.0 1,086.5 1,187.8
-------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Implied Share Price (c)
--------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 14.86 $ 16.54 $ 18.97 $ 22.83
--------
12.82 13.97 16.22 18.68
-------- --------
11.56 12.45 13.62 15.21
--------
10.20 10.85 11.69 12.78
--------------------------------------
</TABLE>
- ------------------------
(a) Projected net debt as of 6/30/99; source: Company.
(b) Present value of cash from sale of Spelling real estate, future film
projects and movie of the week productions.
(c) Diluted shares, based on the treasury method, include 93.1m primary shares
including 7.6m options with an average weighted exercise price of $7.58.
-31-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
G. HISTORICAL STOCK PRICE PERFORMANCE
OVER THE PAST YEAR, SPELLING'S STOCK HAS TRADED PRIMARILY IN A BAND FROM $6.50
TO $9.50.
[GRAPH OF SPELLING SHARE PRICE WITH SIGNIFICANT EVENTS IDENTIFIED OMITTED]
[CORRESPONDING GRAPH OF SPELLING TRADING VOLUME OMITTED]
-32-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
G. HISTORICAL STOCK PRICE PERFORMANCE
OVER THE PAST THREE YEARS, SPELLING'S STOCK HAS TRADED PRIMARILY IN A BAND FROM
$6.00 TO $10.00.
[GRAPH OF SPELLING SHARE PRICE WITH SIGNIFICANT EVENTS IDENTIFIED OMITTED]
[CORRESPONDING GRAPH OF SPELLING TRADING VOLUME OMITTED]
-33-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
G. HISTORICAL STOCK PRICE PERFORMANCE
FOR THE ONE-YEAR PERIOD ENDING THE DAY PRIOR TO VIACOM'S ANNOUNCED OFFER ON
MARCH 19, 1999.
[GRAPH OF INDEXES COMPARING SPELLING SHARE PRICE, COMPARABLE COMPANIES
INDEX(a), DIVERSIFIED MEDIA INDEX(b) AND THE S&P 500 OMITTED]
[CORRESPONDING GRAPH OF SPELLING TRADING VOLUME OMITTED]
- ---------------------
(a) Comparable Index includes: Cinar Corp., King World Productions,
Kushner-Locke, Nelvana Ltd., Endemol, Dick Clark Productions, Trimark
Holdings and Alliance Atlantis Communications.
(b) Diversified Media Index includes: Viacom, Disney, Seagram, News Corp. and
MGM.
-34-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
G. HISTORICAL STOCK PRICE PERFORMANCE FOR THE THREE-YEAR PERIOD ENDING THE DAY
PRIOR TO VIACOM'S ANNOUNCED OFFER ON MARCH 19, 1999.
[GRAPH OF INDEXES COMPARING SPELLING SHARE PRICE, COMPARABLE COMPANIES INDEX(a)
DIVERSIFIED MEDIA INDEX(b), AND THE S&P 500 OMITTED]
[CORRESPONDING GRAPH OF SPELLING TRADING VOLUME OMITTED]
- ---------------------
(a) Comparable Index includes: Cinar Corp., King World Productions,
Kushner-Locke, Nelvana Ltd., Endemol, Dick Clark Productions, Trimark
Holdings and Alliance Atlantis Communications.
(b) Diversified Media Index includes: Viacom, Disney, Seagram, News Corp. and
MGM.
-35-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
G. HISTORICAL STOCK PRICE PERFORMANCE
HISTORICAL CUMULATIVE TRADING VOLUME AT OR BELOW VARIOUS PRICE LEVELS
- - For period ending one day prior to Viacom's public offer for outstanding
shares on March 19, 1999.
ONE YEAR THREE YEARS
- ---------------------------------------- --------------------------------------
[BAR GRAPH OF PERCENT OF SHARES TRADED [BAR GRAPH OF PERCENT OF SHARES TRADED
BELOW VARIOUS PRICES: $6.50-6.9%, BELOW VARIOUS PRICES: $6.00-1.8%,
$7.00-33.7%, $7.50-48.3%, $8.00-56.7%, $6.50-6.7%, $7.00-18.6%, $7.50-37.9%,
$8.50-58.9%, $9.00-67.5%, $8.00-58.7%, $8.50-68.6%, $9.00-85.2%,
$9.50(a)-100% OMITTED] $9.50-96.0%, $10.00-99.6%,
$10.13(a)-100.0% OMITTED]
(a) Highest closing share price of given period.
-36-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
H. ANALYSIS OF PREMIUMS PAID IN SELECTED MINORITY TAKE-OUT TRANSACTIONS
<TABLE>
<CAPTION>
PREMIUM
TRANSACTION SHARE 1 DAY
ANNOUNCEMENT DATE ACQUIROR / TARGET TARGET BUSINESS VALUE ($MM) PRICE PRIOR
- ----------------- ----------------- --------------- ----------- ----- -----
<S> <C> <C> <C> <C> <C>
12/03/98 Fairchild Corp / Banner Aerospace Wholesale aerospace equipment. $82.4 $11.00 25.7%
Inc.
09/23/98 Usinor SA / J&L Specialty Steel Inc. Manufactures steel and steel 115.0 6.38 100.0%
products
09/23/98 Inland Steel Industries Inc / Wholesale steel 61.2 11.44 (8.5%
Ryerson Tull Inc
09/07/98 Billiton PLC / QNI Ltd (Billiton PLC) Nickel mining 268.1 0.65 54.4%
07/21/98 Forum Group (Crestline Capital) / Owns and operates retirement centers 6.5 5.75 24.3%
Forum Retirement Partners LP
04/30/98 Dow AgroSciences (Dow Chemical) / Provides seed and crop services and 355.2 28.00 41.8%
Mycogen Corp (Dow AgroSciences) products for agricultural and
pest-control uses.
03/17/98 INVESTOR GROUP / BET HOLDINGS INC. OWNS AND OPERATES TELEVISION 462.3 63.00 53.7%
STATIONS; PUBLISH MAGAZINES
01/22/98 Buhrmann NV / BT Office Products Wholesale office stationary, 138.1 13.75 32.5%
Intl Inc supplies and equipment
10/23/97 Goodyear Rubber & Tire Co / Brad Wholesale and retail tires, tubes, 20.7 37.25 6.7%
Reagan Inc (Goodyear Tire) auto accessories, appliances and
lawn and garden equipment
09/18/97 Orion Capital Corp / Guaranty Insurance company specializing in 117.2 36.00 10.8%
National Corp specialty property and casualty
insurance coverages which are not
readily available in traditional
insurance markets
09/04/97 INVESTOR GROUP / CINERGI PICTURES PROVIDES, DEVELOPS, FINANCES, 16.3 2.52 26.9%
ENTERTAINMENT PRODUCES AND LICENSES EVENT MOTION
PICTURES FOR EXHIBITION IN DOMESTIC
AND INTERNATIONAL THEATRICAL
MARKETS AND FOR LATER WORLDWIDE
RELEASE IN ALL MEDIA
</TABLE>
<TABLE>
<CAPTION>
PREMIUM
PREMIUM TO
PREMIUM 1 4 WEEKS INITIAL
ANNOUNCEMENT DATE ACQUIROR / TARGET TARGET BUSINESS WEEK PRIOR PRIOR OFFER
- ----------------- ----------------- --------------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
12/03/98 Fairchild Corp / Banner Aerospace Wholesale aerospace equipment. 41.9% 40.8% 12.8%
Inc.
09/23/98 Usinor SA / J&L Specialty Steel Inc. Manufactures steel and steel 112.5% 37.8% 11.0%
products
09/23/98 Inland Steel Industries Inc / Wholesale steel (11.6%) (40.8%) 9.3%
Ryerson Tull Inc
09/07/98 Billiton PLC / QNI Ltd (Billiton PLC) Nickel mining 75.0% 69.4% 22.9%
07/21/98 Forum Group (Crestline Capital) / Owns and operates retirement centers 24.3% 24.3% 27.8%
Forum Retirement Partners LP
04/30/98 Dow AgroSciences (Dow Chemical) / Provides seed and crop services and 40.0% 52.4% 36.6%
Mycogen Corp (Dow AgroSciences) products for agricultural and
pest-control uses.
03/17/98 INVESTOR GROUP / BET HOLDINGS INC. OWNS AND OPERATES TELEVISION 58.5% 58.2% 31.2%
STATIONS; PUBLISH MAGAZINES
01/22/98 Buhrmann NV / BT Office Products Wholesale office stationary, 78.9% 78.9% 31.0%
Intl Inc supplies and equipment
10/23/97 Goodyear Rubber & Tire Co / Brad Wholesale and retail tires, tubes, (1.6%) 5.3% 16.4%
Reagan Inc (Goodyear Tire) auto accessories, appliances and
lawn and garden equipment
09/18/97 Orion Capital Corp / Guaranty Insurance company specializing in 23.9% 27.7% 32.3%
National Corp specialty property and casualty
insurance coverages which are not
readily available in traditional
insurance markets
09/04/97 INVESTOR GROUP / CINERGI PICTURES PROVIDES, DEVELOPS, FINANCES, 24.7% 56.6% 4.6%(A)
ENTERTAINMENT PRODUCES AND LICENSES EVENT MOTION 5.4%
PICTURES FOR EXHIBITION IN DOMESTIC 9.6%
AND INTERNATIONAL THEATRICAL
MARKETS AND FOR LATER WORLDWIDE
RELEASE IN ALL MEDIA
</TABLE>
(a) Final price amended three times from $2.41, $2.39 and $2.30.
-37-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
H. ANALYSIS OF PREMIUMS PAID IN SELECTED MINORITY TAKE-OUT TRANSACTIONS(CONT'D)
<TABLE>
<CAPTION>
PREMIUM
TRANSACTION SHARE 1 DAY
ANNOUNCEMENT DATE ACQUIROR / TARGET TARGET BUSINESS VALUE ($MM) PRICE PRIOR
- ----------------- ----------------- --------------- ----------- ----- -----
<S> <C> <C> <C> <C> <C>
07/09/97 Investor Group / Seaman Furniture Co. Owns and operates retail furniture $45.6 $25.05 21.5%
stores
06/26/97 Rhone-Poulenc SA / Rhone-Poulenc Manufactures pharmaceuticals 4831.6 97.00 22.1%
Rorer Inc
06/20/97 Waste Management Inc / Wheelabrator Manufactures laboratory and medical 869.7 16.50 26.9%
Technologies Inc. equipment and chemicals; construct
and operate refuse to energy
plants; provide engineering
services
06/03/97 FH Faulding & Co Ltd / Faulding Inc Manufactures pharmaceuticals 77.3 13.50 25.6%
06/22/97 Texas Industries Inc / Chaparral Manufactures primary steel products 72.8 15.50 20.4%
Steel Co (Texas Ind)
04/16/97 HARCOURT GENERAL INC / STECK-VAUGHN PUBLISHES BOOKS AND MAGAZINES 40.3 14.75 21.6%
PUBLISHING CORP
03/13/97 VILLAGE ROADSHOW CORP LTD / AUSTEREO OWNS AND OPERATES RADIO 174.7 2.00 4.9%
LTD BROADCASTING STATIONS
01/28/97 Monsanto Co / Calgene Inc Owns and operates greenhouse: 242.6 8.00 62.0%
produce and develop agricultural
seeds, edible plant oils, and
horicultural crops; provide plant
DNA research and development
services
01/21/97 Mafco Holdings Inc / Mafco Manufactures and wholesale 116.8 33.50 23.5%
Consolidated Group cosmetics, fragrances and beauty
care products, licorice and
flavoring extracts; provide
videotape duplicating services;
holding company
12/06/96 Sears Roebuck & Co. / Maxserv Inc Provides technical information 46.0 7.75 19.2%
support services
11/08/96 Pivot Nutrition PTY Ltd / Gibsons Ltd Produces flour and stock feed 9.6 4.83 37.8%
</TABLE>
<TABLE>
<CAPTION>
PREMIUM
PREMIUM TO
PREMIUM 1 4 WEEKS INITIAL
ANNOUNCEMENT DATE ACQUIROR / TARGET TARGET BUSINESS WEEK PRIOR PRIOR OFFER
- ----------------- ----------------- --------------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
07/09/97 Investor Group / Seaman Furniture Co. Owns and operates retail furniture 25.2% 21.5% 4.4%
stores
06/26/97 Rhone-Poulenc SA / Rhone-Poulenc Manufactures pharmaceuticals 22.8% 29.3% 5.4%
Rorer Inc
06/20/97 Waste Management Inc / Wheelabrator Manufactures laboratory and medical 28.2% 30.7% 10.0%
Technologies Inc. equipment and chemicals; construct
and operate refuse to energy
plants; provide engineering
services
06/03/97 FH Faulding & Co Ltd / Faulding Inc Manufactures pharmaceuticals 22.7% 45.9% 12.5%
06/22/97 Texas Industries Inc / Chaparral Manufactures primary steel products 25.2% 29.2% 8.8%
Steel Co (Texas Ind)
04/16/97 HARCOURT GENERAL INC / STECK-VAUGHN PUBLISHES BOOKS AND MAGAZINES 32.6% 24.2% 5.4%
PUBLISHING CORP
03/13/97 VILLAGE ROADSHOW CORP LTD / AUSTEREO OWNS AND OPERATES RADIO 11.8% 27.5% 8.7%
LTD BROADCASTING STATIONS
01/28/97 Monsanto Co / Calgene Inc Owns and operates greenhouse: 60.0% 60.0% 10.3%
produce and develop agricultural
seeds, edible plant oils, and
horicultural crops; provide plant
DNA research and development
services
01/21/97 Mafco Holdings Inc / Mafco Manufactures and wholesale 23.5% 27.6% (13.0%)
Consolidated Group cosmetics, fragrances and beauty
care products, licorice and
flavoring extracts; provide
videotape duplicating services;
holding company
12/06/96 Sears Roebuck & Co. / Maxserv Inc Provides technical information 67.6% 55.0% 10.7%
support services
11/08/96 Pivot Nutrition PTY Ltd / Gibsons Ltd Produces flour and stock feed 37.8% 44.2% 3.4%(a)
29.1%
</TABLE>
- ------------------------
(a) Final price twice amended from $4.67 and $3.74
-38-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
H. ANALYSIS OF PREMIUMS PAID IN SELECTED MINORITY TAKE-OUT TRANSACTIONS (CONT'D)
<TABLE>
<CAPTION>
ANNOUNCEMENT TRANSACTION SHARE
DATE ACQUIROR/TARGET TARGET BUSINESS VALUE ($MM) PRICE
- ----------- ----------------------------------- -------------------------------------- ----------- ------
<C> <S> <C> <C> <C>
08/15/96 ACC Corp/ACC TelEnterprises (ACC Provides telephone communication $ 36.3 $15.67
Corp) services
5/27/96 Novartis AG/SyStemix Inc. (Novartis Manufactures and develops cellular 107.6 19.50
AG) processes and products for the
treatment of toxic side effects from
chemotherapy and other medical
therapies
02/16/96 RANK COMMERCIAL LTD./WHITCOULLS PUBLISHES BOOKS; WHOLESALE STATIONERY 69.3 1.72
GROUP
02/05/96 CUS Acquisition Inc/Customedix Corp Manufactures dental and medical 3.6 2.38
products
02/06/92 CHARTER CO. (AMERICAN PRODUCES TELEVISION SHOWS AND FILMS 43.0 7.25
FINANCIAL)/SPELLING ENTERTAINMENT
INC.
05/01/91 TELE-COMMUNICATIONS INC./UNITED OWNS AND OPERATES MOVIE THEATERS, 1189.0 16.19
ARTISTS ENTERTAINMENT CABLE TELEVISION SYSTEMS, AND
NONRESIDENTIAL BUILDINGS
07/12/90 PARAMOUNT COMMUNICATIONS/TVX OWNS AND OPERATES TV STATIONS; HOLDING 61.4 9.50
BROADCAST GROUP INC. COMPANY
</TABLE>
<TABLE>
<CAPTION>
PREMIUM PREMIUM PREMIUM PREMIUM
ANNOUNCEMENT 1 DAY 1 WEEK 4 WEEKS TO INITIAL
DATE ACQUIROR/TARGET TARGET BUSINESS PRIOR PRIOR PRIOR OFFER
- ----------- ----------------------------------- -------------------------------------- ------- ------- ------- ----------
<C> <S> <C> <C> <C> <C> <C>
08/15/96 ACC Corp/ACC TelEnterprises (ACC Provides telephone communication 26.5% 43.3% 44.3% 13.4%
Corp) services
5/27/96 Novartis AG/SyStemix Inc. (Novartis Manufactures and develops cellular 4.7% 69.6% 59.2% 14.7%
AG) processes and products for the
treatment of toxic side effects from
chemotherapy and other medical
therapies
02/16/96 RANK COMMERCIAL LTD./WHITCOULLS PUBLISHES BOOKS; WHOLESALE STATIONERY 25.1% 34.4% 27.6% 9.6%
GROUP
02/05/96 CUS Acquisition Inc/Customedix Corp Manufactures dental and medical 22.6% 26.7% 5.6% 22.8%
products
02/06/92 CHARTER CO. (AMERICAN FINANCIAL)/ PRODUCES TELEVISION SHOWS AND FILMS 52.6% 45.0% 45.0% 0.7%
SPELLING ENTERTAINMENT INC.
05/01/91 TELE-COMMUNICATIONS INC./UNITED OWNS AND OPERATES MOVIE THEATERS, 19.9% 22.2% 25.7% NA
ARTISTS ENTERTAINMENT CABLE TELEVISION SYSTEMS, AND
NONRESIDENTIAL BUILDINGS
07/12/90 PARAMOUNT COMMUNICATIONS/TVX OWNS AND OPERATES TV STATIONS; HOLDING 26.7% 90.0% 85.4% 26.7%
BROADCAST GROUP INC. COMPANY
--------------------------------------------------------------------------------
HIGH 100.0% 112.5% 85.4% 36.6%
LOW (8.5%) (11.6%) (40.8%) (13.0%)
MEDIAN 25.1% 32.6% 37.8% 10.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HIGH 53.7% 90.0% 85.4% 31.2%
MEDIA TRANSACTIONS LOW 4.9% 11.8% 24.2% 0.7%
MEDIAN 23.4% 23.5% 36.3% 9.2%
--------------------------------------------------------------------------------
</TABLE>
-39-
<PAGE>
SPELLING ENTERTAINMENT GROUP INC. IV. VALUATION SUMMARY
- --------------------------------------------------------------------------------
I. SUMMARY OF PREVIOUS SALE PROCESSES
- - Viacom initiated a formal sale process for Spelling in 1995. According to
Viacom, it was targeting a valuation in the range of $1.0 billion,
excluding the value of the interactive games division.
- - As a part of this process, over 114 companies were contacted.
- 6 Tier A companies
- 37 Tier B companies
- 71 other companies.
- - Only three companies expressed interest serious enough to warrant
additional due diligence.
- Party A submitted a bid in the general range of $500 million to $700
million. However, Party A's senior management decided not to pursue
the Company as an acquisition candidate.
- Party B never submitted a firm bid and eventually dropped out of the
process.
- Party C submitted a written indication of interest at $700 million to
$800 million, but at the time Viacom believed that Party C did not
have the financial resources to complete the transaction.
- - This past summer, Viacom re-initiated the process and had substantive
discussions with three parties:
- Party D was interested but did not formally bid, possibly because they
were considering a sale of their own company, which was announced
subsequently.
- Party E conducted some due diligence but never submitted a formal bid.
- Party F proposed a business combination involving the TV assets of one
of its subsidiaries, but control would have remained with Party F and
Viacom would have been left with an interest in an illiquid
partnership.
-40-
