TBS Breakup Negotiations Appear to Be Breaking Up : Media: Talks degenerate as two industry giants fail to reach agreement on how to divvy up Turner Broadcasting’s assets.

Negotiations to break up and distribute the assets of Turner Broadcasting System have ground to a halt over internal issues of management control and taxes, sources close to the companies said Tuesday.

Over the last two weeks, Turner and its controlling shareholders, Tele-Communications Inc. and Time Warner Inc., have been discussing a complex plan to break up Turner Broadcasting and divide the assets among them.

The discussions have been promoted by company founder and Chairman Ted Turner, who has chafed under the tight reins of his partners since the cable industry rescued the company from financial disaster in 1987.

But in recent days the negotiations, which had slowly progressed, fell apart over several issues. According to knowledgeable sources, TCI Chief Executive John C. Malone did not want Turner’s assets--which include four of the industry’s most valuable cable TV networks--to fall into the hands of chief rival Time Warner Inc.

Sources also said that the tax liabilities resulting from such a complex deal were prohibitive.

“After a lot of pretzel turns, they couldn’t pull it off,” said one executive close to the talks. “It’s hard to satisfy three willful players in one transaction when you’re talking billions of dollars in value.”

Under the plans being discussed by the companies, TCI would have gotten CNN and Headline News while Time Warner wanted the entertainment networks TNT, TBS and the Cartoon Network.

TCI was also interested in Turner’s sports team franchises, the Atlanta Hawks basketball team and the Atlanta Braves baseball team. TCI, through its affiliate Liberty Media Corp., controls Prime Network, the country’s largest cable TV regional sports network.

Time Warner saw Turner’s three entertainment cable TV networks as a positive addition to the company’s other cable properties, which include HBO, Cinemax and a 50% stake in Comedy Central. The company additionally had its eye on cartoon producer Hanna-Barbera, which Turner acquired last year, as a way to expand Warner Bros.’ animation business.

TCI, Time Warner and Turner Broadcasting all declined comment Tuesday. TCI’s Malone, in New York to give a speech at a cable industry function, said on CNN’s “Moneyline” Tuesday night when asked about the status of the negotiations: “Ted Turner remains the captain of his own ship and whatever he wants to do will ultimately happen.”

But the breakdown in the negotiations leaves one issue unresolved for TCI and Time Warner, which jointly control about 41% of Turner’s stock and have six seats on Turner’s 15-member board: Turner’s continued restlessness.

The Atlanta-based cable TV entrepreneur wants to set out on a new adventure--he’s been hinting that he’s interested in buying a Hollywood film studio, for one thing. The breakup of Turner Broadcasting would have provided Turner, who owns 37% of the stock, with a financial windfall in the billions--enough to stake his claim in Hollywood. One source close to Turner, however, denied that the mogul ever intended to fully abandon his media empire.

Given the potentially complex regulatory problems associated with breaking up Turner Broadcasting and distributing the company’s assets to the two largest players in the cable TV industry, it is not surprising that the parties could not work out a deal, said Lisbeth R. Barron, an analyst with S.G. Warburg & Co. in New York.

“That could have compelled everybody to put it on hold for three to six months,” Barron said.