Warner Won’t Sell 66% MTV Stake to Group

Warner Communications said Friday that it will not sell its two-thirds interest in MTV Networks to an investor group that includes a New York investment firm and senior MTV executives that had offered about $310 million.

A Warner spokesman said the company was involved in other negotiations to sell its MTV stake, which is actually owned by Warner-Amex Cable Communications, a joint venture of Warner and American Express. Warner announced earlier this month that it would exercise its option to buy out American Express’ interest in Warner-Amex for $450 million.

Warner also announced earlier this month that it had entered into an agreement with Viacom International, a major New York-based cable-programming firm, giving Warner the right for 90 days to sell to Viacom Warner-Amex’s two-thirds interest in MTV for $310 million in cash. The rest of MTV’s stock is publicly held and traded over the counter.

Three Cable-TV Services

MTV Networks operates three 24-hour cable-TV services--Music Television, the pioneering music-video channel; the VH-1 music-video channel, which was launched in January and aimed at an older audience than the original MTV, and the Nickelodeon children’s channel.

Forstmann, Little & Co., the investment firm that organized the proposed buy-out of Warner’s interest, said in a statement Friday that it was “disappointed” that Warner’s board did not accept its offer.

According to the statement, the firm was told Aug. 9 that the Warner board had approved the offer, subject to American Express’ consent, and that American Express had consented Tuesday.

After receiving that consent, the statement said, “we proposed that the price to be paid to all MTV shareholders be increased to $33 per share, subject to Warner’s agreement that it not take certain actions after the completion of the transaction that could be damaging to MTV. In view of the fact that all necessary financing for our offer had been in place at the time of Warner’s Aug. 9 board meeting, we could have promptly completed the transaction.”

Objects to Statement

Warner’s spokesman said portions of Forstmann, Little’s statement were “factually incorrect.”

“First of all, they were never informed that our board had approved their offer, because our board never voted on it,” he said.

The spokesman also objected to the statement about Warner taking actions potentially damaging to MTV. “They just came in the other day and attached certain terms that we couldn’t go along with, and that was it.”

Declining to say what those terms were, the Warner spokesman pointed out that, “since part of the proposed deal was for us to acquire a 20% equity in MTV along with Forstmann, Little and MTV management, we certainly wouldn’t take any actions to damage MTV.”

Warner-Amex is the nation’s sixth-largest operator of cable-television systems. It owns 19% of another cable-TV programming company, Showtime/The Movie Channel.

An additional 31% of Showtime is owned by Warner outright, and the remaining 50% is owned by Viacom.

If Warner exercises its option of selling Warner-Amex’s stake in MTV to Viacom, that company could follow one of two courses: it could buy only the MTV shares or it could exercise an option to buy American Express’ former Warner-Amex stake, with certain exclusions, for $450 million.

In the latter option, Viacom would not buy Warner Amex’s 19% stake in Showtime/The Movie Channel.

The second option would result in a Warner-Viacom joint venture. Each would own one-third of MTV, with public shareholders owning the remaining one-third. Each would also own one-half of Warner-Amex and Showtime/The Movie Channel.