Clash Over ‘Culture’ at Time Inc. Hearing
Lawyers for Time Inc. and Paramount Communications met in Delaware Chancery Court here Tuesday and debated whether Time’s resistance to Paramount’s takeover bid was designed to preserve Time’s journalistic culture or entrench its management.
By the time the long-awaited, 5 1/2-hour session ended, Time’s stock had slid $6.375 a share to close at $146.25 in a sign that some stock speculators believed Time had an edge in the battle. But others insisted there was no predicting the ruling of Chancellor William T. Allen, which is expected by the end of this week.
Paramount has asked the court to block Time’s $14-billion tender offer for Warner Communications, which Time made June 16 to stymie Paramount’s $12.2-billion offer for Time. Paramount has argued that Time directors have deprived Time shareholders of an opportunity to vote on its offer, while Time has contended that its combination with Warner will ultimately lift Time’s stock far higher.
Attorneys for Paramount hammered at Time’s contention that it had forged its deal with Warner, and resisted Paramount’s bid, to preserve the journalistic culture fostered by founder Henry R. Luce.
Time executives have said they arranged for Time managers to remain in the company’s top positions for years after Time and Warner are combined to ensure that Time’s culture is not overwhelmed.
But Paramount’s lawyers insisted that the Time executives’ primary motive was to fight off a takeover and guarantee their jobs. They quoted a confidential memo written in August, 1987, in which Gerald M. Levin, Time’s vice chairman, said that after a merger, “An overriding question would still be: Have we secured the company? Is sheer size sufficient, or will we still need a large block of stock in friendly hands?”
They quoted a recently retired Time director, Arthur Temple, telling another director that he believed Chairman J. Richard Munro and President Nicholas J. Nicholas Jr. were “fleecing their nests” with the compensation plans they had proposed.
Melvyn Cantor, a Paramount attorney, questioned how important Time’s journalistic culture is to the company today, when its magazines produce only about 20% of its revenue. He noted that Nicholas, who will ultimately become Time’s chief executive, spent his career in Time’s cable systems business rather than on the magazine side.
The “abstract concept of Time culture doesn’t bear scrutiny,” Cantor said.
Time attorney Robert Joffe contended that Time executives were concerned that the company have a management that would recognize the differences between Time’s journalistic culture and the entertainment culture that has been predominant at Warner. He quoted a Time director’s comment that “show business people cannot be treated as button-down types, and journalists cannot be treated as artsy craftsy people.”
He said Time’s outside directors, including former IBM Chairman John Opel, Henley Group Chairman Michael Dingman, Radcliffe College President Matina Horner and others were not “patsies” that Time’s management could manipulate to guarantee their own jobs.
The Delaware Chancery Court courtroom overflowed with lawyers, reporters and stock speculators, who have invested billions in the shares of Time, Paramount and Warner since the takeover fight erupted June 7. Onlookers stood two deep along the wall of the chamber, and more than 50 people were denied entrance.
The room became so hot with the crowd that Chancellor Allen finally invited the lawyers arguing before him to take off their jackets.
Joining Paramount in its arguments were lawyers for disgruntled shareholders who also sued to try to block completion of the Time-Warner deal. Among them were lawyers representing the interests of Texas billionaire Robert M. Bass, Hollywood producer A. Jerrold Perenchio and Cablevision Systems Corp., a Long Island-based operator of cable TV systems.
‘Odd Way to Go’
Attorneys for Paramount and the unhappy shareholders argued again that efforts by Time directors to rebuff the Paramount offer represented a breach of their fiduciary duty.
These steps, they said, included the stock-swap deal that put a huge block of Time stock in Warner shareholders’ hands, fees paids to banks to keep them from working for a hostile bidder and “blackout provisions” that bar Time executives or advisers from soliciting or considering competing merger deals.
Herbert Wachtell, an attorney representing Warner, contended that Time’s bid for Warner did not represent a defensive move because it had put the company at risk of a takeover.
“If you’re really interested in entrenchment, this is a very, very odd way to go--to put yourself at risk,” he said.