Turner Pushes for Merger Deal With NBC

Ted Turner refuses to be counted out of General Electric’s NBC sweepstakes. Even as others appeared to be closing in on a deal for the network, sources say cable magnate John C. Malone pleaded Turner’s case Thursday in a meeting with GE Chairman Jack Welch at NBC’s Rockefeller Center offices.

Malone, whose Tele-Communications Inc. holds a minority stake in Turner Broadcasting System, apparently hopes to persuade Welch that Turner can still pull off a deal, despite significant obstacles. One source described Malone as a “facilitator” for Turner, though another said Malone might also have used the Welch meeting to promote TCI’s own agenda.

Turner and Malone declined comment on the meeting Thursday. But people close to the talks say Walt Disney Co. and Time Warner still appear to have the inside track. Sources say Disney and GE are only a few hundred million dollars apart on the price, with Disney trying to hold the line at $4.2 billion. Time Warner, negotiating to acquire 49% of NBC in a stock-swap deal that excludes the stations it owns, also remains in hot pursuit.

Some analysts assume Disney will prevail, due to its largely cash offer. Others say that Welch still prefers to sell just 49% of the network, which would seem to give Time Warner an edge if it can overcome regulatory hurdles that forbid cable operators from owning networks.

Welch’s own ambivalence may be one explanation for why no one’s rushing to the altar. But, whatever the outcome, sources credit the GE chairman with masterfully building interest in an asset that went begging only a year ago. “He’s created a nice little auction,” said one source.

The interest in NBC, which GE purchased from RCA eight years ago, is also due to the recent resurgence in the reputations of the major networks. Once regarded as relics, they have been rediscovered by advertisers and by studios seeking guaranteed outlets for their programs.

GE has hired the blue chip New York investment banking firm Allen & Co. to represent it in discussions with prospective buyers. Sources say that Disney Chairman Michael D. Eisner personally met with GE executives in New York earlier this week, before returning to the company’s Burbank headquarters on Thursday. Sanford Litvack, who was recently named Disney’s chief of corporate operations, is said to be one of its point men in the talks.

Even though Disney and GE seem to be razor close on terms, sources cautioned that either side could still walk away, especially given Eisner’s well-known aversion to big acquisitions.

Investors may share that aversion. Disney shares were near their 1994 low Thursday. They closed down 50 cents, to $40.25, Thursday in New York Stock Exchange trading. The 1994 low is $39.625. The high is $48.625.

Moreover, NBC could be worth considerably more than the offer that Disney is apparently weighing. NBC’s cash flow is expected to reach $550 million by next year. At a minimum multiple of 10 times cash flow, the price tag for 100% of NBC could exceed $6 billion.

Time Warner, meanwhile, seems to be stubbornly standing its ground in the NBC negotiations. One source close to the talks says Chairman Gerald M. Levin still “desperately” wants to acquire a piece of the network as a vehicle for programming. “Time Warner definitely hasn’t given up, nor will they,” the source said. “This is going to go right down to the wire.”

Turner’s best shot seems to be in filling the void left by Time Warner, when and if the entertainment conglomerate walks away from the table. Turner could grease the skids by trading one of his cable networks, such as TNT, for Time Warner’s stake in Turner. He’s resisted such a move in the past, but sources say Turner is more open to a deal now for the sake of NBC.

After lusting after a network to merge with his CNN for years, and previously falling short, Turner seems to feel that his moment has arrived. He has openly ruminated about his goals, and raised the issue again this week during a private get-together of cable TV executives at the Museum of Radio and Television.

“Time Warner has been a good partner,” sources say Turner told the audience. “No,” he added for dramatic emphasis, “they have been a great partner.” Then, waiting a one-two beat for suspense, Turner added: “Let me tell you right now we’re getting a divorce.”

Turner next turned to Time Warner’s HBO Chairman Michael Fuchs, sitting near him. “Michael, it’s over,” Turner told him. “Get your own damn network.”

And Turner was just warming up. He next entertained questions from the 60 or so senior cable TV industry executives who had come to hear him speak “off the record.” Kay Koplovitz, the longtime head of USA Network, asked the question that was on many people’s minds.

“Ted, if you fail again to buy a network, will you retire and, if so, what will you and Jane (Fonda, his wife) do?” Koplovitz asked. Turner looked up at the ceiling and then down at his feet, holding the crowd at bay, before answering, “Up yours, Kay.”

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Unplugging the cable: Southwestern Bell, which last year became the first telephone company to own cable systems, may now be looking to get out of the business.

Cable TV industry sources report that Southwestern Bell has quietly approached a handful of cable TV operators, including Denver-based Jones Intercable, about buying the former Hauser Communications Inc. cable systems it bought only 10 months ago for $650 million. The systems serve about 220,000 subscribers in suburban Washington.

Southwestern Bell’s historic deal last year set off a rush among regional Bell companies and cable TV operators to merge and form strategic ventures in anticipation of the vaunted 500-channel information superhighway.

Southwestern Bell’s reasons for selling the cable systems less than a year after it acquired them remain unclear, but cable TV industry sources said it may be due to the telephone company’s failed effort to merge the systems into a joint venture with Cox Communications. That venture, which aimed to become one of the largest cable operators in the country, fell apart after regulators ordered a further cutback of cable TV rates.

Ironically, Southwestern Bell is now in the process of applying for regulatory clearance to offer phone service over the Hauser cable TV systems. However, most cable industry executives believe that only cable operators with a minimum of several million subscribers will be able to afford to offer the panoply of information superhighway services in the future.

A spokesman for Southwestern Bell declined comment.