Rumors of GE Bid Propel Time Stock; Battle Under Way

Time Inc. shares jumped to $180 on Tuesday on rumors that General Electric might top Paramount Communications’ $175-per-share bid, while on another front, Time began a public fight in Washington to thwart Paramount’s unsolicited offer.

Time has taken its case to the Federal Communications Commission to argue that the agency doesn’t have the power to grant a Paramount request to set up a voting trust that would allow Paramount to purchase Time’s shares. The FCC is a forum because it regulates cable television and Time is one of the nation’s largest operators.

Paramount responded by calling Time’s legal arguments “unsound.”

Meanwhile, Time’s 12-member board has been asked to convene late this afternoon for a meeting that may prove pivotal in the takeover battle, although the company is not likely to make a statement before Thursday.

In a telephone interview, Time director Henry R. Luce III said he didn’t think that Time’s greatest concern should be finding a way to get cash to its shareholders, even though Paramount’s cash offer is on the table.

“Why should it be?” asked Luce, the son of Time founder and the longest serving member of the Time board. “If you pay cash, then it’s over with. Then the investor no longer has an investment.”

Luce, 64, who controls about 4.6% of Time stock, reiterated a statement he made earlier this week that, in his view, the board’s responsibility is to consider “enduring values” for shareholders.

On Wall Street, trading in Time shares was whipped by reports that a Drexel Burnham Lambert stock analyst had predicted that GE might make an offer. By the end of the day, however, Drexel was denying the forecast, and Time’s stock was easing from its high of $182.75. For the day, it was up $5. The stock of GE, which had no official comment on the speculation, slid $1.25 to $53 on very heavy volume.

The episode provided an insight into the workings of the Wall Street rumor mill and illustrated again the fever that has gripped the market since Paramount offered $10.7 billion for Time in an attempt to break up Time’s merger with Warner Communications.

“It’s amazing how much power an analyst’s words can have, particularly in a situation like this,” said Joseph Battipaglia, an analyst with Gruntal & Co. in New York.

GE Owns NBC

The rumor that ignited Time’s stock originated at an early morning meeting that Drexel traders held with some of the investment bank’s stock analysts and salesmen. Before the opening of trading, the group routinely convenes by way of Drexel’s in-house communications system to discuss the upcoming session.

Asked why GE’s stock has recently sagged, GE analyst Nicholas P. Heymann told the group that the reason might lie in some investors’ expectations that GE might make a bid of its own for Time’s coveted package of publishing and video properties. Heymann, an outspoken analyst who was formerly a GE auditor, went on to say that GE’s debt load would be “manageable” even if GE bid as much as $200 a share, said Drexel spokesman Steven Anreder.

GE owns NBC and would face an obstacle in buying Time’s vast cable systems because of government rules prohibiting simultaneous ownership of a television network and cable systems.

Another regulatory conflict would be GE’s ownership of NBC television stations in markets where Time owns cable systems.

But Heymann said the cable properties could be held at least temporarily in a trust. He said that, through asset sales and the rich cash flow of the combined company, there would be a “significant reduction of debt” within a year, the Drexel spokesman said.

While Heymann “did not opine on whether a deal would be good,” according to Anreder, Heymann’s discussion of a possible bid was “misconstrued” as word of the discussion filtered to Wall Street.

“I don’t know how that idea was transmitted, or who garbled it,” Anreder said.

Value Enhanced

Heymann didn’t respond to requests for an interview, but Drexel apparently regarded the episode seriously enough that it asked Heymann to prepared a written report for the firm’s public relations staff.

At the stock’s peak, the speculation had added $570 million to the total value of Time’s shares. About 3.4 million shares of GE stock traded hands in the day’s market session, making it the most heavily traded stock on the New York Stock Exchange. Paramount gained 50 cents to $57 on 2.2 million shares, while Warner fell 50 cents to $54 on trading of 2.3 million shares.

GE’s investor relations department, which offered an official “no comment” on the report, “was swamped” with calls for information, according to GE spokesman Jack Batty.

At the same time, GE was evidently indicating to some analysts that it was not likely to join a bidding war for Time. GE officials pointed out to analysts recent statements from GE Chief Executive John F. Welch that GE “was pretty happy with the portfolio of companies they have,” said Albert E. Turner, analyst with Duff & Phelps in Chicago.

But other analysts speculated that General Electric might be interested in striking a deal with one or several other companies that would enable it to acquire a piece of Time’s television programming operations, which include the Home Box Office pay TV service.

GE last year paid $2.3 billion for the chemical business of Borg-Warner Corp., after paying $6.4 billion for RCA, the former parent of NBC, in 1986.

Earlier this month, there were published reports that GE Capital might be prepared to lend large sums to Hollywood entrepreneur A. Jerrold Perenchio and cable television executive Charles F. Dolan if the two put together an offer for Time.

In Washington, however, a Senate staffer said Tuesday that he has been told by a GE representative that the company is not pursuing either role. The staffer spoke on condition that he not be identified.

Elsewhere in the nation’s capital, Time attorneys filed a 46-page motion at the FCC, to block Paramount’s effort to set up a voting trust. Paramount said last week that the trust would enable the company to acquire Time shares while it awaits FCC approvals for certain cable TV license transfers.

Time’s attorneys, however, argue that cable license transfers must be approved by local governments before federal action is appropriate. If the FCC approves the Paramount request, it would effectively be usurping the cities’ power, Time said.

‘Spousal’ Objection Raised

In response, Paramount spokesman Jerry Sherman said: “What we are applying for are FCC licenses; we’re not using the trust for local franchise approvals.”

Time also objected that Paramount would violate media cross-ownership rules in two instances. Because Paramount has announced plans to acquire TVX Broadcast Group’s television stations, it would be confronted by an prohibited overlap in certain markets where Time has cable TV systems serving nearly 10% of its total subscribers.

On another front, Time raised a “spousal” objection because Paramount’s chief executive, Ronald L. Nelson, is married to the treasurer of Times Mirror Co., which owns television stations in four markets where Time has cable systems.

On behalf of Times Mirror, which owns the Los Angeles Times, a spokeswoman said, “Although our corporate treasurer (Joyce M. Fields) has been married to an officer of Paramount for several years, we have nothing whatsover to do with this matter.”

Paramount said it would seek a FCC waiver on the issue of cross-ownership of its television stations, and dismissed the “spousal” objection with a wry statement. “It is hard to believe that our tender offer will stand or fall on that issue,” Sherman said.

Paul Richter reported from New York and Kathryn Harris from Los Angeles.

TIME INC. STOCK

Tuesday close: $180, up $5.