Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, September 23, 1995 TAG: 9509250040
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Turner, the media maverick who created CNN, will become the No. 2 man at Time Warner when he sells Turner Broadcasting System Inc. in a stock swap that keeps Time Warner on top as the biggest media and entertainment company in the world.
``I want to see what it's like to be big for a while,'' Turner joked at a news conference.
The deal - the third media megamerger in the two months - was approved by the boards of both companies but needs the go-ahead from regulators and shareholders.
The Consumers Union promptly said it would ask federal regulators to block the deal because it could mean higher cable prices and prevent some cable programs from reaching viewers.
And Time Warner's telephone partner, US West, sued to block the deal, claiming the combination would improperly compete with the Warner Bros. moviemaking and HBO services the utility owns with Time Warner.
The merger is a bold gamble by Gerald Levin, Time Warner's chairman. He is betting that the combination of Turner's globally recognized cable networks with Time Warner's vast entertainment, media production and distribution systems will boost earnings and revive the company's listless stock.
``This is far and away the dream deal,'' Levin said.
Time Warner includes Time and Sports Illustrated magazines, record companies, HBO and the makers of the ``Batman'' movies. In addition to CNN, Turner Broadcasting includes the makers of such movies as ``When Harry Met Sally'' and TV's ``Seinfeld,'' and baseball's Atlanta Braves.
A combined Time Warner-Turner company would have had revenue of more than $18.7 billion last year.
The deal - a reaffirmation of the belief that size and scope lead to success in the entertainment industry - came in the same week in which AT&T Corp. decided to split in three because it had become too big.
In the past two months, Walt Disney Co. struck a deal to buy Capital Cities-ABC for $19 billion, and Westinghouse Electric Corp. agreed to acquire CBS for $5.4 billion.
Disney would have overtaken Time Warner if not for the Turner deal. Time Warner's move to remain No. 1 means it will be hard for American households to avoid the company when they seek news or entertainment.
Time Warner shareholders may not like the deal, because the issuing of the 178 million new shares required would dilute their holdings.
Turner will become Time Warner's biggest shareholder with 10 percent and will control two seats on the expanded 17-member Time Warner board. He also will oversee all of Time Warner's video operations including the old Turner operations and the HBO pay service.
``We think it is going to be great for the shareholders of both companies,'' Turner said. ``I've basically put my entire life savings into Time Warner stock, and I'm looking for better-than-average returns.''
On Wall Street, Time Warner rose 871/2 cents to close at $40.621/2 a share in trading on the New York Stock Exchange, but was still below the $42.371/2 of Aug. 29, the day before the talks were disclosed.
Turner slipped 25 cents to $28.871/2 a share on the American Stock Exchange. It had stood at $24 on Aug. 29.
The two companies began negotiating about a month ago and concluded after a marathon session that ran late Thursday.
The deal gives Turner a way to take a key role in a much larger enterprise after he failed to buy a television network.
The negotiators had to overcome numerous hurdles in satisfying the diverse group of cable industry owners with stakes in Turner.
High on the list was John Malone, chief executive of Tele-Communications Inc., the nation's biggest cable operator. TCI controls 21 percent of Turner, has three seats on its board and power to veto any major deals.
Malone agreed to place the roughly 9 percent stake that his company will own into a trust that lets Time Warner's Levin exercise the voting power.
In return, TCI will get extended agreements to carry Turner cable networks and the right to buy TBS' interest in SportsSouth, a regional sports cable network, for $60 million.
Some critics said federal regulators may not like seeing the biggest cable system operator owning a stake in the second-biggest cable system operator, Time Warner.
``It marries the two largest cable monopolies, which own the lion's share of popular cable programs, with one of their most likely competitors - US West,'' said Gene Kimmelman, co-director of the Consumer Union's Washington office.
by CNB