2 Buy-Out Bids Received for Warner Amex

Warner Communications Inc. and American Express Co. have received at least two buy-out proposals for their jointly owned cable-TV venture, but sources close to the bidding companies say Warner has not yet indicated a willingness to sell.

According to one source familiar with the proposal, Time Inc. has offered to create a 50-50 partnership with Denver-based Tele-Communications Inc. to pay $750 million in cash and assume about $500 million in debt to acquire Warner Amex Cable Communications Inc.

Time’s offer tops an earlier proposal made by Viacom International Inc. to assume the debt and pay $710 million in cash, according to a source close to Viacom, who added that Viacom is considering raising its bid. A Viacom source insists, however, that his company has made no formal bid but only “suggested” that it wants to buy all of the assets of Warner Amex.

Formed six years ago, Warner Amex is the nation’s sixth-largest cable-TV operator and owns about two-thirds of MTV Networks Inc. as well as 19% of Showtime/The Movie Channel. Analysts have estimated that the sale of Warner Amex would generate at least $375 million in cash for Warner Communications. Many industry sources have assumed that Warner would agree to a sale because Warner’s top management reportedly has been searching for the financial means to take the company private.

No Response

But on Tuesday, sources close to both Viacom and Time said Warner has not responded to their overtures, and they predicted no quick outcome.

“We have made a suggestion but never officially put an offer on the table because we don’t really know if (Warner Amex is) for sale,” the Viacom source said.

“American Express is interested in selling . . .(but) Warner Communications is not necessarily in agreement,” a source close to Time said. According to this source, Time submitted its bid to American Express last Wednesday, prior to an American Express board meeting. The same information was submitted to Warner last Thursday, but Warner has not responded, the source said.

Spokesmen for Warner Communications, American Express, Warner Amex, Viacom and Time all declined comment. Officials at Tele-Communications could not be reached.

Two weeks ago, however, Warner Amex announced that it has received “several expressions of interest to purchase all or part” of the company.

Buy-out proposals may force Warner and American Express to play a high-stakes poker game if they don’t work in tandem to sell the cable venture to a third party. Under the terms of their joint venture, neither partner can sell to an outsider without first offering its half to the other partner. If that partner responds with a higher bid, the initiating partner must accept it. So if American Express makes the first move, Warner could offer a slightly higher price and gain control of the whole company, perhaps to seek a still-higher offer.

Apparent Optimism

The source close to Time said if that company’s bid prevails, Time is prepared to sell Warner Amex’s 19% stake in Showtime/The Movie Channel, because of the potential antitrust problems raised by Time’s ownership of Home Box Office Inc., the nation’s largest pay-TV service.

Although Time owns the nation’s second-largest cable-TV system company (American Television & Communications), and Tele-Communications ranks as the nation’s largest such operator, the two companies appear optimistic that they could avoid antitrust objections by operating Warner Amex as a separate entity. Such an “off-balance sheet” operation would also avoid dilution of the parent companies’ earnings, analysts noted Tuesday.

Viacom, the nation’s 10th-largest cable-TV operator, owns 50% of Showtime and is believed eager to acquire the Warner Amex stake in that second-ranked pay-TV company.