Time Warner Details Plans to Pay for Takeover : $12-Billion Debt Load Is Lower Than Some Analysts Expected

Times Staff Writer

Time Warner Inc. said Wednesday that it will pay for the second half of its $14-billion acquisition of Warner Communications with three kinds of securities, leaving the newly formed entertainment giant with a debt load of about $12 billion.

Time Warner, which defeated a Paramount takeover bid for Warner July 24, will buy the outstanding 41% of Warner stock with a combination of convertible preferred stock, payment-in-kind preferred stock and common stock in the BHC Communications broadcast holding company. Payment-in-kind securities pay their interest in shares of the same security rather than in cash.

Together, the package was valued by the company at $70 a share, although some analysts predicted it would initially trade somewhat below that figure.

In a statement, Time Warner Co-Chairmen J. Richard Munro and Steven J. Ross said the company had "designed an overall financial structure that will allow us to build our businesses, capitalize on new opportunities and challenges worldwide, and ensure growing value for our shareholders."

'Back End' of Deal Was Key

Time Warner paid about $7 billion in cash for the first 100 million Warner shares; it will purchase 86.8 million shares in this latest transaction, which was unanimously approved by the boards of both companies. The merger will be formally completed in the fourth quarter, Time Warner said.

The composition of the "back end" of the transaction was a delicate issue for the new company. Time Warner needed to satisfy Warner shareholders without too greatly diluting the value of Time shares. It also needed to preserve enough cash to keep the new company viable.

The company's new debt load of about $12 billion compares favorably to the $14 billion or $15 billion that some analysts had been expecting during the takeover fight.

"They decided not to send all the cash out the door. That should make it a more dynamic company," said Jeffrey Logsdon, analyst with the investment firm of Crowell, Weedon & Co. in Los Angeles.

J. Kendrick Noble, analyst with the Paine Webber brokerage in New York, predicted that investors "will look favorably on this." Jeffrey Russell, analyst with Drexel Burnham Lambert, said the investment firm took the view that the offer "is good for shareholders but leaves the company with the flexibility it needs."

Officials of Chris-Craft Industries, a large Warner shareholder and often its sharpest critic, could not immediately be reached for comment. BHC Communications is a broadcast television and cable TV concern that has been jointly owned by Warner and Chris-Craft.

In composite trading on the New York Stock Exchange, Time Warner shares closed Wednesday at $141.75, up $2.125. Warner shares ended the day at $65.375, off $1.625.

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