American Express offered Wednesday to pay Warner Communications $450 million in cash for Warner's half of their joint cable-TV venture. The action will force Warner to decide not only its future in the cable-TV industry but could intensify or solve Warner management's quarrel with the company's largest shareholder, Chris-Craft Industries.
Under the terms of the partnership that formed Warner Amex Cable Communications six years ago, Warner has just 20 business days--until Aug. 14--to accept the American Express offer or match it. Now that American Express has triggered their buy-sell agreement, Warner has the option of buying out American Express for the same price.
If Warner decides to sell, American Express said it will in turn sell all the Warner Amex assets for $900 million to Time Inc. and Tele-Communications, which have also agreed to assume about $500 million of Warner Amex's debt.
Offered $850 Million
Until Wednesday, Time and Tele-Communications were offering $850 million in cash plus the assumption of debt to acquire Warner Amex, which is the nation's sixth-largest cable-TV operator. The two companies have been trying to acquire Warner Amex since May, when they first offered to pay $750 million in cash and to assume about $550 million in debt.
Warner has not responded publicly to any offers for the cable venture, but American Express has shown great eagerness to sell its stake in the money-losing venture, which has cost American Express a total of $350 million.
The company said it was "favorably disposed" to the $750-million offer last May. Then, on June 11, American Express announced that it had signed a definitive agreement with Time and Tele-Communications, accepting the offer when the cash portion was increased to $850 million.
But American Express stopped short each time of triggering the buy-sell agreement with Warner, apparently at the behest of Time and Tele-Communications. According to sources, Time and Tele-Communications feared that Warner would align with Viacom International or some other firm to match the American Express bid.
Sources close to Time, TCI and American Express said Wednesday's move was timed because the companies believe that Warner management has reached a critical juncture in its fight to rid the company of its largest shareholder. Time and TCI are now willing to gamble that Warner will accept the sweetened cash offer in order to buy out Chris-Craft's 29.5% stake in the voting shares of Warner.
Warner Vice President Geoffrey W. Holmes declined, however, to comment on any such speculation. As for Warner Amex, Holmes said, "we just received a copy of the proposal from American Express. We're obviously going to study it and proceed from there."
Denver-based Tele-Communications is the nation's largest cable system operator, while Time owns the second-largest operator, Englewood, Colo.-based American Television & Communications.