Time Stock Up on Word Cablevision Is Considering Bid
Time Inc. stock gyrated wildly Wednesday after the disclosure that Cablevision Systems, the nation’s eighth-largest cable company, is part of a group that is “actively considering” a takeover bid for the embattled video and publishing giant.
Time stock had advanced more than $4 a share during the day but closed at $155.25, up only $1.25, as skepticism about the likelihood of a new offer appeared to grow.
The disclosure was made in court papers in Delaware, where Cablevision and other Time shareholders are trying to block Time’s rejection of a $12.2-billion hostile takeover offer from Paramount Communications. Time has countered that bid by making a $14-billion offer for Warner Communications.
Cablevision, of Woodbury, N.Y., declined to elaborate, saying it never comments on takeover speculation. The company owns cable systems around New York City, in Michigan and Ohio, and it also has interests in cable TV programming services.
It was unclear to whom Cablevision may have been talking about a bid. The cable firm’s two partners in the Delaware suit, Texas billionaire Robert M. Bass and Hollywood producer E. Jerrold Perenchio, quickly said they weren’t participating in any such discussions.
Involved in Suit
“Only Cablevision is involved, of the three plaintiffs in the suit,” said Frank Mankiewicz, a Bass spokesman.
The disclosure of Cablevision’s interest was made in a letter by a Time attorney concerning a request that Time had made for Cablevision documents as it prepared to resist the shareholder suit. Time attorney Lawrence A. Hamermesh wrote that Cablevision had resisted the request for documents on grounds that Cablevision is “actively considering” a bid.
Under Delaware law, a company can refuse such requests if it is considering a bid for the company making the requests. People close to Time, and some Wall Street analysts, argued that Cablevision’s interest was solely in blocking those requests.
John Reidy, an analyst with Drexel Burnham Lambert Inc., noted that Cablevision is already carrying heavy debt and said the company would need “significant equity partners” to put together an offer. He downplayed the disclosure, saying Wall Street has already expected there would be “a long list of bidders for Time” if the Delaware courts hold that Time should not have rejected the Paramount bid.
Delaware Chancellor William T. Allen is scheduled to hear arguments on the case Tuesday, in what some believe will be the decisive round in the takeover battle.
Separately, Paramount said it is extending the deadline on its $200-a-share tender offer for Time from midnight, July 7, until midnight, July 28. Paramount said the new deadline was chosen to give Chancellor Allen time to rule on its challenge, and time for the Delaware Supreme Court to consider an appeal.
The extension was expected. Paramount said about 2 million of Time’s 67 million shares of stock so far have been tendered.
Led by Chairman and Chief Executive Charles F. Dolan, Cablevision has gained a reputation as an aggressive cable operator that has not been afraid to accumulate debt.
As it has purchased other cable systems, its long-term debt has risen to $1.9 billion. Cablevision lost $159 million last year on sales of $494 million. Analysts expect it to lose money this year and next year as well.
But some analysts believe Cablevision’s earnings will surge in the years ahead, because of its cable systems and its investments in cable programming. The company operates several regional sports channels and a movie channel.
In composite trading on the New York Stock Exchange, Warner Communications shares closed at $61.25, up 87.5 cents. Paramount stock closed at $59.375, down 87.5 cents. On the American Stock Exchange, Cablevision shares closed at $41.75, off 87.5 cents.