Threat to Time Warner-Turner merger is removed Delaware court rejects U S West's effort to block it

Media and entertainment

June 07, 1996|By NEWSDAY

NEW YORK -- Time Warner overcame a major hurdle to its $7.5 billion takeover of Turner Broadcasting System when a judge yesterday threw out U S West's attempt to block the planned merger.

A Delaware Chancery Court judge said that a 1993 deal giving U S West a 25.5 percent stake in a Time Warner entertainment group did not prevent that company from increasing its stake in Turner.

Judge William T. Allen denied U S West's request for an injunction.

U S West, which paid $2.5 billion for its stake, had claimed that Time Warner, in fully owning some of Turner's operations, might favor those operations over the Time Warner-U S West units.

Those units include the Warner Bros. movie studio, HBO and cable television systems with 9 million subscribers.

"This removes a major obstacle," said Howard Anderson, managing director of Yankee Group, a Boston research service.

The merger, which would create the nation's biggest entertainment company, topping Walt Disney Co., still faces a review by the Federal Trade Commission on antitrust questions.

The FTC is expected to rule by July and may require the sale or reorganization of some parts of the merged entity.

The decision is especially a victory for Gerald Levin, chief executive of New York-based Time Warner, who had envisioned consolidation of the former Time Inc., Warner Communications and Turner at least as far back as 1987.

Time Warner said in a statement that it feels "vindicated" by the decision.

"We intend to put this matter behind us, and we look forward to continuing to work with U S West in pursuit of our shared telecommunications strategy," the company said.

The decision reasserts Time Warner's dominance in shaping and controlling that strategy.

But U S West, based in Englewood, Colo., said that even though the judge denied the injunction, he "validated our belief that the acquisition carries numerous potential conflicts."

The company said that if the Turner operations are not put into the Time Warner-U S West partnership, which is called Time Warner Entertainment, Time Warner "must manage the conflicts."

The actual decision, though, states that Time Warner Entertainment would manage any Turner assets it got control of "if that could be agreed" upon by the parties involved.

The judge wrote that U S West had not cared much, at first, whether Time Warner increased its Turner stake.

He said testimony by U S West witnesses to the contrary was "self-serving."

Despite the decision, Time Warner, the nation's second largest cable system operator, may still work out a deal with U S West for that Baby Bell to take over control of the cable operations, given the antitrust questions that the Turner acquisition has raised.

On Wall Street yesterday, Time Warner stock rose 12.5 cents to $41.25. Turner B-class stock gained 62.5 cents to $27.75, and U S West Media Group stock fell 50 cents to $17.125.

Pub Date: 6/07/96

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