Warner Shareholder Sues to Stop Lorimar Deal

The largest shareholder of Warner Communications on Tuesday filed suit to block Warner’s purchase of Lorimar Telepictures unless a dispute over a group of television stations is settled to its satisfaction.

The lawsuit is the latest flare-up in the often stormy four-year relationship between Warner and Chris-Craft Industries, an entertainment company which owns about 21% of Warner common stock.

In the suit filed in New York State Supreme Court, Chris-Craft claims that Warner’s acquisition of Lorimar Telepictures--best known for its “Dallas” and “Falcon Crest” prime-time television soap operas--violates an agreement between both companies. Until Warner complies with the agreement, Chris-Craft wants the court to block the $619-million merger.

“We view the lawsuit as without merit,” said Geoffrey Holmes, senior vice president of Warner Communications. “I see this as a clear form of harassment.”

The agreement in dispute was forged in early 1984 when Warner turned to Chris-Craft in an effort to ward off an unwanted takeover by media baron Rupert Murdoch. Chris-Craft sold Warner a 42.5% stake in its broadcasting unit--BHC, which owns seven TV stations, including KCOP-TV in Los Angeles. In return, Warner gave Chris-Craft 19% of its stock at the time.

Chris-Craft says the agreement prohibits Warner from owning any other television stations unless Warner reduces its interest in BHC to below 25% and that Warner violated the agreement when it agreed to purchase Lorimar, which owns six TV stations.

“Warner can sell its BHC stock pursuant to our agreement and be in full compliance,” Chris-Craft said in a statement. “Should Warner insist upon breaching the contract, however, it must assume full responsibility for any delay in or interference with the Lorimar acquisition.”

Chris-Craft officials would not comment further.

Warner insists that it has not violated the agreement. Under the merger agreement with Lorimar, Warner would never take ownership title of the Lorimar stations, Holmes said. Instead, ownership of the stations will be placed in a trust until they are sold, he said.

Agreements have been signed to sell three of the six stations, Holmes said. “We were interested in Lorimar because of their television properties and production.”

Holmes noted that Chris-Craft Chairman Herbert J. Siegel, who sits on Warner’s board, abstained when Warner’s board voted to approve the purchase of Lorimar in May.

In June, 1987, Siegel threatened to oppose the relection of Warner Chairman Steven J. Ross.

Warner’s board supported Ross and rejected Siegel’s nominee to the board.

Warner also tired to buy back its shares from Chris-Craft for $37 a share, but Siegel demanded $45.