Turner Is Buying Hanna-Barbera Film Library

Turner Broadcasting System said Tuesday that it and an investment partner signed a definitive agreement to purchase the program library and production commitments of cartoon producer Hanna-Barbera Productions for as much as $320 million.

The acquisition gives TBS, which already owns four cable-TV networks, possession of one of the largest animation libraries in Hollywood and a formidable arsenal to launch a children-oriented cable-TV network, as many in the cable industry expect.

Turner disclosed in August that it entered into exclusive negotiations to buy the Universal City-based animation studio, which had been on the block for more than a year. Turner outbid several other companies, including MCA and Hallmark Cards.

Hanna-Barbera is a subsidiary of Great American Communications, which is 44.7% owned by Cincinnati financier Carl M. Lindner’s American Financial Corp. AFC also owns 53% of Charter Co., which in turn owns TV producer Spelling Entertainment. Lindner had been seeking a buyer for Hanna-Barbera to reduce AFC’s debt.

Hanna-Barbera pioneered low-cost animation in the 1960s by creating such popular TV shows as “The Flintstones,” “Yogi Bear,” “The Jetsons” and “Scooby Doo.” The studio once produced more than 60% of Saturday morning cartoons, but in the past decade it has suffered setbacks at the hands of low-budget competitors.

Cable industry executives and analysts expect that Turner will start a cartoon and children-oriented cable channel and use the Hanna-Barbera library as its main source of programming. In similar fashion, Turner acquired MGM/UA’s film library in 1986 and used it as the backbone to launch TNT, which has become one of the largest networks in cable.

“Turner has seen how hugely successful Nickelodeon and the Disney Channel have been, and they would love to have a piece of that business,” said Ned Zacher, an analyst with Duff & Phelps, a Chicago money management firm.

Nickelodeon, owned by Viacom, and Walt Disney Co.’s Disney Channel have grown significantly in recent years thanks to a boom in the “kidvid” market--viewers from ages 2 to 11.

But launching cable networks is more difficult today than it was when Turner started TNT in 1988. More than a dozen new cable networks are fighting for access on local cable systems, and it is uncertain whether operators will welcome another network, even one produced by Turner.

“There’s little appetite right now because of channel scarcity and cost,” said William R. Cullen, senior vice president of United Artists Cable Communications in Los Angeles. “Given current cost structures, we just can’t justify rate increases by adding new programming.”

The acquisition will be structured so that Turner and Apollo Investment Fund will be equal partners in the Hanna-Barbera film library, and Turner will own outright the distribution rights and production business.

According to a knowledgeable source, Turner and Apollo will each contribute $50 million in equity toward the library in addition to borrowing $160 million in bank debt. Turner in addition will pay about $60 million for Hanna-Barbera’s distribution rights and animation production company, the source said.

Turner said the $320-million purchase price included $40 million in contingent payments to be paid over an unspecified period.

Negotiations between Turner and Hanna-Barbera dragged on for months because of complexities involving interlocking Lindner interests. Turner wanted the valuable distribution rights to Hanna-Barbera’s shows, but they were owned by Worldvision Enterprises, the distribution subsidiary of Spelling Entertainment.

For Spelling to give up syndication rights to Hanna-Barbera’s shows, Great American paid it $24 million in cash plus distribution rights it held to various old shows such as “Barnaby Jones,” “Cannon” and “The Fugitive.” In addition, Great American transferred to Spelling the licensing and merchandising subsidiary Hamilton Projects Inc.

As a result of those transactions, Great American said it received net cash proceeds of $255 million.