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Time, Warner Reportedly on Verge of Merger

Times Staff Writer

Warner Communications Inc. and Time Inc., two of the world’s most powerful entertainment and media companies, are on the verge of announcing a merger that would create a titan worth nearly $15 billion, industry sources said late Friday.

“Time-Warner is a done deal,” declared one entertainment industry executive, while an investment banking source added: “There is a very, very high degree of probability that it’s done.” The banker cautioned, however, that in the past, Time executives have had “difficulty closing a transaction. Of (all) I’ve ever seen, they’re the worst.”

No Warner or Time official could be reached for comment.

Both Time and Warner have fretted about controlling their destinies during the frenzied takeover battles of the 1980s. Last year, the two companies discussed the possibility of merging their cable television holdings but were unable to reach an agreement.

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A combination of the two companies will create a cable company second only to Tele-Communications Inc. of Denver, which has rapidly added programming and movie theater outlets to its empire of cable systems.

In programming, Time’s Home Box Office subsidiary dominates pay television, while Warner operates one of the most respected motion picture studios in Hollywood. Despite two recent lackluster years at the box office, Warner last month snared more Academy Award nominations than any other studio, and it continues to enjoy long-running relationships with such stars as Clint Eastwood and Goldie Hawn. And while Time was a latecomer to the home videocassette business, Warner has profited in the videocassette field by drawing on its enviable film library.

In magazine publishing, Time simply has no equal. In addition to its namesake Time magazine, the company publishes Life, Sports Illustrated, People, Money, Fortune and Southern Living. It is also a 50% owner of the company that publishes McCall’s and Working Woman, and a 50% owner of Whittle Communications, publisher of business and health periodicals. In addition, Time and Warner each have publishing operations. Warner owns DC Comics, Mad Magazine and Warner Books. Time owns Time-Life Books, Book-of-the-Month Club, and Little, Brown & Co.

In recorded music, Warner reaps more profits than any other company, including CBS Records-- acquired last year by Sony in a highly touted $2-billion deal. Warner derives 45% of its total revenue from record labels that include Electra, Asylum, Nonesuch, Atlantic and Warner Bros.

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The Time-Warner merger would be accomplished by an exchange of stock, with a value of at least $50 assigned to each Warner share, according to one source.

Co-Managers Expected

Sources said the combined company would be managed for the near future by co-chief executive officers--presumably Warner Chairman Steven J. Ross, 61, and Time Chairman J. Richard Munro, 58.

The price of both Warner and Time Inc. shares have risen sharply in recent days. Warner stock began the week at $41.25 and closed just shy of $46. Time’s shares jumped above $109 from $104.50 at the start of the week.

The possibility of a merger between Time and Warner apparently was broached last summer when the two companies were engaged in ultimately unsuccessful negotiations for a possible combination of their cable and entertainment businesses.

Cable Powers

Discussions at the time reportedly centered on combining Warner Cable, with 1.4 million subscribers, with Time-controlled American Television & Communications Inc., with 3.8 million subscribers. The companies also discussed including in the venture Time’s Home Box Office unit and Warner’s movie operations, according to published reports at the time.

The proposal met resistance from Time’s board, according to a story last September in the Wall Street Journal.

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The Journal indicated that one stumbling block was a delay in completion of Warner’s purchase of Lorimar-Telepictures Corp., a leading supplier of television programming such as “Dallas” and “Falcon Crest.” However, analysts at the time said discussions of a full-fledged combination between Time and Warner might resume once the Lorimar acquisition was consummated. The deal was completed in January.


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