Time Opts to Buy Warner, Shuts Door on Paramount : Files Suit to Block Any Disruption

Time Inc. today rejected a $10.7-billion buyout offer from Paramount Communications Inc. and launched a tender offer for Warner Communications that values Warner at more than $12.4 billion.

In addition, Time filed a lawsuit to block Paramount from taking any steps “to disrupt the merger” of Time and Warner, but Paramount said it will press ahead with its unwanted, $175-a-share bid.

They were part of a complicated, three-way battle for Time, which had announced a merger with Warner before Paramount jumped in with its own bid for Time that was launched June 7.

A merger of Time and Warner would create the world’s largest media company.

After the announcement, Warner stock jumped $3.87 1/2 to $59.50 a share on the New York Stock Exchange, and Time’s slipped $3.87 1/2 to $167.62 1/2 a share. Paramount stock was down $1 to $58.50 a share.

Time said Paramount Communications’ unsolicited bid was “not in the best interests of Time, its stockholders and its other constituencies” and added that Time is not for sale.

The media giant said its rejection was based on several factors, including the opinions of its investment banking advisers, and added that the Paramount bid is “highly conditional and subject to many legal and financial contingencies.”

Requires Approvals

The bid is also conditioned on regulatory approvals that Paramount Communications may not receive for six to nine months, Time said.

Time said it would pay $70 a share in cash for 100 million Warner shares in a tender offer, and then $70 a share in cash and securities for the remaining Warner stock.

As of Dec. 31, 1988, Warner had 177.2 million shares outstanding, fully diluted.

Warner and Time also said they had carried out a stock swap provided for under their earlier merger agreement. The stock swap was intended as a defense against an unsolicited bid for either company.

Time’s lawsuit, filed at federal court in Manhattan, charged securities laws violations and sought a preliminary injunction to prevent Paramount from “acquiring or attempting to acquire any shares of Time’s stock” and “making or attempting to make any tender offer” for Time’s securities.

‘Defensive Device’

Paramount, calling Time’s bid for Warner “a defensive device, pure and simple,” said it would continue its pursuit of Time.

“From the standpoint of Time shareholders, we don’t see how it begins to compare with our offer of $175 a share in cash for all shares,” Paramount said.

Securities analysts said the bid for Warner does little to resolve Time’s battle with Paramount.

Peter Appert, the media analyst for the investment firm C. J. Lawrence, Morgan Grenfell Inc., said Time still has the problem of “figuring out a way to get to its shareholders value that is equal” to the $175 a share Paramount has offered.

He said the decline in Time’s stock price today indicated Wall Street is skeptical that the Time bid for Warner will be successful.

Time and Warner did not immediately say whether their shareholder meetings, scheduled for June 23, will take place.