Warner Deal Bad for Time Shareholders, Tisch Says

CBS Chief Executive Laurence A. Tisch on Wednesday slammed the proposed merger of Time Inc. and Warner Communications Inc. as a poor deal for Time shareholders and denounced as “nonsense” the companies’ contention that media companies must combine to compete globally.

In an interview, Tisch said the theory that the companies have used to explain the deal was the same theory used to justify the formation of global industrial conglomerates in the 1960s.

“In the ‘60s . . . you put two pieces of junk together and you (would) pay a great price for it because it was ‘synergistic,’ ” Tisch said. “Now you’re hearing the same nonsense on media properties. . . . It’s all nonsense.”

He said the Time-Warner stock-swap merger is worth about $100 a share to Time stockholders, compared to values of $180 to $200 a share that stockholders could receive if another company bought Time outright. Time shares closed Wednesday at $113.25, down $1, in New York Stock Exchange composite trading.

In announcing the proposed $18-billion merger March 5, Time Inc. and Warner Communications said a combination was necessary if the two companies were to survive the developing competition with giant European and Asian media and entertainment corporations.

The deal would create the world’s largest media and entertainment conglomerate, with interests in cable programming and cable systems, books, magazines, records, movies and television programming.

While the merger has won the support of many Wall Street analysts, some Time shareholders have publicly expressed unhappiness with its terms. Time stock has gyrated in the month since the deal was announced on rumors that another bidder would emerge. But none has materialized.

CBS has already publicly complained that the deal shows how other competitors in the entertainment industry are favored over the networks. Under government rules, the networks are barred from owning cable systems, and they are limited in how much financial interest they can hold in TV programming.

But Tisch’s criticism went further Wednesday. He suggested that the companies’ explanation that American firms needed to form conglomerates to fight foreign adversaries was promoted to win public support for the deal.

“The public relations people are having a field day,” Tisch said.

He said 10 companies might be interested in buying Time if it were up for sale. But he predicted that the deal would close as planned.

Other bidders would not want to “take the heat” for launching a hostile bid because of the risk that another company would ultimately win Time with a higher bid once a general auction were begun, he said.