What the heck. Last week Levin, Malone and Turner emerged at the center of negotiations to combine Time Warner and Turner, an $8 billion-plus deal that would overtake the recent combination of Walt Disney and Capital Cities/ABC as the world’s largest media company. The formal talks extended into the holiday weekend, and sources said late last week things looked promising. But overcoming a glaring lack of chemistry among themselves isn’t the only obstacle for Levin, Malone and Turner. A torrent of rumors across Wall Street had General Electric and its NBC subsidiary, or Rupert Murdoch’s News Corp. poised to wrest Turner from Time Warner’s grasp. And at Time Warner. long-feuding executives were jockeying to take credit for the deal, criticizing each other through press leaks and fretting about losing power to Ted Turner if a deal is consummated. Meanwhile, a Time Warner investor, the telephone giant U S West, is reportedly consulting lawyers to find out if it has the authority to possibly block a Time Warner-Turner deal.
Last week’s turn of events began unfolding almost a decade ago. In 1986, cable giants bailed out a nearly bankrupt Turner Broadcasting. They got not only huge ownership stakes in return but veto power over any major Turner dealings. Over the years, for example, Levin and Malone have scuttled Turner’s pursuit of the erstwhile cable channel Financial News Network and Home Shopping Network. By 1993, Turner had become so frustrated that he asked Levin and Malone to buy him out. But the three could not make a deal then. This year Levin decided to sell Time Warner’s Turner stake to use the proceeds to reduce Time Warner’s $15 billion of debt. And Turner stepped up his network hunt by trying to mount a bid to top Westinghouse’s $5.4 billion deal for CBS. Now he and Levin have abruptly embraced each other.
At the weekend, major questions remained about the proposed deal:
Malone is the key. To bless a deal he wants several concessions, including a juicy arrangement to carry Time Warner-Turner cable channels and a premium price for TCI’s Turner stock. Levin, Malone and Turner have already forged the broad outlines of a pact. But Malone is a dogged negotiator with a reputation for balking at the last minute-remember the proposed merger with Bell Atlantic–as a way to win further concessions. If the deal happens, Turner would emerge as vice chairman and Time Warner’s largest shareholder. The holdings would include Warner Bros., Castle Rock and New Line Cinema studios; cable channels CNN, TNT and the Cartoon Network; superstation WTBS; pay-TV giant HBO; the Atlanta Braves; the World Wrestling Federation; Warner Music Group; the No. 2 cable-TV group, and a magazine empire that includes Time, Fortune and People.
Analysts say such a merger makes sense in an industry that is beginning to deliver entertainment products across the globe. And Levin also would wrest bragging rights as the world’s biggest jumbo media giant from Disney’s Michael Eisner. But there are other reasons. Turner Broadcasting would generate lots of cash to help Time Warner service its enormous. debt–about $15 billion worth. Some Time Warner shareholders insist that Levin is also motivated by fears that GE might try to take over Time Warner to merge it with NBC. His takeover fears were first heightened when Edgar Bronfman Jr.’s Seagram acquired a big stake in Time Warner before recently buying MCA. Bronfman is said to be dismayed by Levin’s Turner move because a deal could weaken Seagram’s Time Warner investment for now,
Why not? He already has two bosses: Levin and Malone. (He has called them his “handlers.”) According to people close to the talks, Turner would retain vast autonomy to run Turner Broadcasting without meddling from Levin. He would be the combined company’s largest shareholder, with the clout to pressure Levin, his boss, in the boardroom.
Well, maybe, With a big stake in the “new” Time Warner, Malone would emerge as a powerful outside influence on the company, while Turner would be a powerful insider. As major shareholders, they presumably would have the company’s best interest in mind. But their interests could clash with Levin’s vision. They might not agree with Levin’s outside moves, which have included the troubled strategic alliances with Japanese companies and U S West. And that’s the big risk for Levin: if the three Media Masters of the Universe clash. bet on Turner and Malone to push Levin aside. Together. they would own almost 20 percent of the new company.
