After five weeks of tortuous negotiations, Time Warner Inc. Chairman Gerald Levin's "dream deal" finally came true yesterday as Turner Broadcasting System agreed to be acquired in a deal that would make the resulting company the largest in a media industry dominated by giants.
"It was never so bad and it didn't get personal," he said.
Clouds on horizon?
But people familiar with the cable industry wonder how well Mr. Levin will be able to sleep with Mr. Turner in the same tent.
"Can Ted Turner be happy not calling the shots -- or will he eventually end up calling the shots?" said Michael Meyerson, a University of Baltimore law professor and co-author of a book on the cable TV industry.
When the Time Warner-Turner talks were disclosed three weeks ago, many observers expressed doubt that a merger could ever go through because of the many obstacles to an agreement. Thus, it was with some justification that Mr. Levin hailed the deal as "a monumental feat."
Malone could have stopped it
The biggest obstacle in the road to Mr. Levin's "sublime combination" was John Malone, president of Tele-Communications Inc., the only U.S. cable television company larger than Time Warner Cable.
Mr. Malone, reputedly one of corporate America's shrewdest negotiators, controls 21 percent of Turner as a result of the same bailout that gave Time Warner a share.
He held the power to scuttle any deal involving Turner that was not to his satisfaction.
To appease Mr. Malone, Time Warner agreed to extend TCI's agreements to carry Turner cable networks and granted it the right to acquire TBS' interest in SportsSouth, a regional sports cable network, for $60 million.
Time Warner also agreed to grant TCI's Liberty Media subsidiary option to purchase its Florida-based Sunshine Network for $14 million.
Time Warner will also pay a premium price for the class of stock held by TCI.
The agreement also would give TCI an estimated 9 percent stake in Time Warner, making Mr. Malone a shareholder in his closest competitor.
To alleviate antitrust concerns, Mr. Malone agreed to place those shares in a trust controlled by Mr. Levin.
Food for the skeptics
Mr. Turner said at yesterday's news conference that TCI will be a "passive" investor in Time Warner, but that met with skepticism among those familiar with Mr. Malone's career.
"He's never been passive in anything," said Mr. Meyerson. "He's always been one of the most active people in all over cable."
Mr. Meyerson said the trusteeship arrangement could draw the attention of antitrust officials.
"It really depends on where the regulators see the future of competition," Mr. Meyerson said. "Is it between Time Warner and TCI, or is it between the cable industry and the phone industry?"
The deal would bring together two giants in both news and entertainment.
New York-based Time Warner, with $15.91 billion in 1994 revenues, publishes Time, People, Sports Illustrated, Fortune and other magazines.
It controls the nation's second-largest chain of cable TV systems, with about 11 million subscribers, and owns such popular cable channels as Comedy Central, E! Entertainment TV, Courtroom Television Network and Black Entertainment Television.
Its other entertainment companies include its Warner Bros. records, film and television subsidiaries.
TBS, with $2.81 billion in 1994 revenues, is best known for its ownership of Cable News Network and its related news properties, CNN Headline News and CNN International.
But it also owns a wide range of entertainment companies including the Cartoon Network and Turner Classic Movies cable channels, the Castle Rock and New Line Cinema movie production companies, the Atlanta Hawks basketball team and baseball's Atlanta Braves.
'A perfect fit'
"In many ways, they're a perfect fit," said Mr. Meyerson, who said the deal reflects the cable industry's preparations for a coming war with telephone companies over who will provide video to the home.
But industry analysts questioned whether the merger would fare any better than Time Inc.'s $14 billion acquisition of Warner Communications Inc. in 1989.
"The knock on Time Warner has been all along that they never fully exploited the synergies between Time and Warner," said Larry Gerbrandt, senior analyst at Dataquest Inc. in Carmel, Calif. There are synergies in the current deal, he said -- "the question is whether the individuals are strong enough to accomplish them."
But Mr. Rosenbaum said the apparent synergies between entertainment companies, print media and television news operations often collapse in the face of reality. For instance, viewers might now see more Time writers on CNN's Crossfire, he said, but that doesn't mean they're necessarily the best for the job.
"Journalists don't synergize," said Mr. Rosenbaum. "It's not in their blood."