Following Comcast Corp.'s bid to spoil the merger of CBS Inc. and Mr. Diller's QVC, Mr. Diller is believed to be lining up backers for an independent bid to buy controlling interest in CBS.
Under the scenario, Mr. Diller would walk away from QVC with at least $100 million, which would be combined with a pool of other investors to make a new run at CBS.
Theoretically, the bid would be hostile, but Mr. Diller already has the tacit blessing of CBS Chairman Laurence Tisch as his heir apparent, and most of the CBS management are looking forward to his second coming.
"He tasted it for two weeks and he wanted it badly. Do you think for one minute that he's not coming back for another try?" said a senior CBS executive.
Plans for a CBS-QVC merger fell apart last week when Comcast, a 15% stakeholder in QVC, made its own bid to acquire QVC for about $2.2 billion. Other suitors are expected to come forward for QVC, possibly a large retailer like Sears, Roebuck & Co., but more likely a major financial services company.
As for CBS, the network then essentially created a window for a new suitor that begins closing July 25. On that date, CBS will commence a self-tender offer that will burn off more than $1 billion in cash, to be used to buy back up to 3.5 million shares of CBS stock at $325 per share.
Whether Mr. Diller can muster the backing for a bid before or after the tender offer, analysts believe he can gain control of CBS.
In principle, he would need only about 20% of CBS stock-the amount the Tisch family's Loew's Corp. currently controls-and the endorsement of the CBS board.
One Tisch family confidant believes it's likely Mr. Tisch will simply sell Mr. Diller their stake and give him their blessing.
"I think [Mr. Tisch] would like to take his cash and leave," the associate said. "He's already told everyone that he'd like to turn the company over to Diller. How would you feel if you went back to running a company that doesn't want you anymore?"
"In a situation like this, it looks like all you need to do is buy Tisch out," said Jessica Reif, an analyst who follows CBS for Oppenheimer & Co., New York. "That might not seem very fair to CBS shareholders, but they'd be getting much better management in return, and that could be better for them in the long run."
Ms. Reif estimated Loews' 20% stake of the 16.6 million shares of CBS stock would fetch about $1.3 billion.
If a buyer waits until after the tender, Loews' stake theoretically would be reduced to about 20% of 12.5 million shares trading at about $350 per share, or a total cost of about $880 million.
Either way, Mr. Diller could easily raise the cash for such a deal. He has close ties to billionaire David Geffen and is being backed heavily by Tele-Communications Inc. Chairman John Malone.
The only wild card would be if other interested suitors decide to step forward and raise the ante.
Among those rumored to be eyeing Black Rock are Walt Disney Co. and Turner Broadcasting System, but analysts believe neither will jump into a bidding war.
"Disney has never demonstrated an interest in paying a premium for anything they've bought, and who else would be interested in buying a broadcast network. Ted Turner? Right now, Turner doesn't have any money. And a CBS merger with Turner would have a lot of regulatory obstacles," Ms. Reif said.
While billionaires such as former Metromedia owner John Kluge could also swing such a deal, few see the strategic benefits for them to buy CBS.
On the distribution side, logical suspects might be one or more of the regional Bell operating companies, which have plans to be active players in the media superhighway but don't have the program expertise or library.
CBS could provide both. The network is the premier programming brand, and while CBS has a relatively small programming library, it's poised to expand with the end of the financial interest and syndication rules in November 1995.