Time’s Limbo Fuels Lobbying, Speculation

The suspense over Time Inc.’s future continued to color Wall Street trading and Washington rhetoric as yet another day passed without action by Time’s board on a hostile bid by Paramount Communications Inc.

Sources said the 12-member Time board is likely to meet today, however, to discuss how--or whether--Time will try to salvage its plan to merge with Warner Communications. Until Paramount made its surprise $175-a-share offer last week, both Time and Warner had expected their stock-swap proposal to be approved by shareholders at meetings on June 23. So far, neither Time nor Warner has canceled its meeting.

On Wall Street, traders’ attention turned anew to Paramount and Warner, which ranked second and third, respectively, on the New York Stock Exchange’s most active list.

Paramount rose $1.75 to close at $59.50, with nearly 4 million shares--or almost 3.4% of its capitalization--changing hands. Warner rose 75 cents to close at $55 on a volume of 2.5 million shares--about 1.5% of its common shares outstanding.

Letter to FCC

One investment banker, who gives Time and Warner “less than zero” chance of proceeding with their original deal, wagered that Time is “trying to orchestrate a bid for Paramount” to unnerve the hostile bidder.

In Washington, meanwhile, lobbying was evident at both the Federal Communications Commission and on Capitol Hill.

Hawaii Atty. Gen. Warren Price III sent a three-page letter to FCC Chairman Dennis R. Patrick urging the commission to deny Paramount’s request to transfer shares of Time to a voting trust until the agency approves transfer of licenses related to Time’s cable television business.

Price said Hawaii law requires action by its public utility commission before any cable franchises can be transferred, and he urged the FCC not to “abrogate” the state’s powers.

Meanwhile, two Democratic senators said they were concerned that the battle over Time would result in greater media concentration. Sen. Howard Metzenbaum (D-Ohio) reiterated his earlier opposition to the Time-Warner deal and expressed similar feeling about Paramount’s bid.

Such combinations raise “the threat of less diversity and higher prices to end users--book and magazine readers, moviegoers and cable subscribers,” Metzenbaum told the Senate Commerce Committee.

Scouting for Murdoch

Sen. John Kerry (D-Mass.) asked whether “the national good is somehow served” by a takeover battle whose outcome may hinge on who has the most cash.

On Wall Street, the price of Time shares fell $4.875 to $175.125. A day earlier, Time’s shares had climbed $5 on rumors that another bid might materialize.

Meanwhile, an investment banking firm said it was retained last week by media baron Rupert Murdoch to analyze the battle for Time. “Something’s going to happen, and it’s going to create opportunity,” said Robert Pirie, chairman and chief executive of Rothschild Inc.

Murdoch, the controlling shareholder of News Corp. and its 20th Century Fox Film studio, threatened a takeover bid for Warner in 1984 but sold back his Warner shares for a profit in a practice regarded as “greenmail.” As part of the settlement, Murdoch agreed not to acquire Warner stock for 10 years, a Warner spokesman said.

Wall Street analysts continued to speculate Wednesday about the options available to the Time board. The company might offer to buy Warner, or it might recapitalize and pay a large dividend to Time shareholders to placate those who want some cash payment, now that the Paramount offer is on the table. The merger with Warner might be abandoned altogether, some said.

Could Sell Assets

Each option seems to have a serious flaw that imperils the independence of the companies involved, several analysts said.

Yet another possibility is a sale of all Time assets. Under federal tax law, a formal liquidation would spare the company the hefty capital gains tax on the partial sale of assets that might occur if it is acquired by a debt-laden company, said Emanuel Gerard, a principal of the New York research firm of Gerard Klauer Mattison & Co.

“A formal liquidation is a high-class form of scorched earth. It may be spite, but it is profitable spite,” said Gerard, who left Warner’s office of the president in 1984.

“If the Time board crosses the bridge that it can no longer be an independent company, that would probably be a way to maximize shareholder value,” Gerard said. “Were that to happen, I believe it would be a seminal event in American business, and there would be fallout in Washington.”