News > Deals
Time-Turner deal OK'd
September 12, 1996: 7:48 p.m. ET

FTC divided, but approves Time Warner-Turner merger
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NEW YORK (CNNfn) -- The Federal Trade Commission announced its approval Thursday for Time Warner Inc. to proceed with its $6.5 billion acquisition of Turner Broadcasting System Inc.
     The FTC approval came on a 3-2 vote late Wednesday. The two commissioners casting "no" votes argued the agency was being too strict in the requirements it was imposing before allowing the acquisition to go forward.
     FTC approval of the acquisition, which will create the world's largest media and entertainment conglomerate, with $20 billion in assets, had been expected. Both Time Warner and Turner have scheduled Oct. 10 shareholder meetings to approve the deal, and the merger is expected to close shortly after those votes.
     The FTC said its decision, which follows the outlines of a settlement negotiated with FTC staff in July, will become final following a 60-day public comment period.
     "This settlement would preserve competition and protect consumers from higher cable service prices and reduced programming choices by ensuring that competing cable operators, new technologies and future programmers can gain access to Time Warner-Turner's customers and programming," FTC Chairman Robert Pitofsky said in a statement.
     He added that the two companies would control 40 percent of U.S. cable programming.
     In its approval, the FTC limited the influence of a major shareholder, Tele-Communications Inc., the nation's leading cable television operator.
     Yet TCI will still have significant clout in the new entity, according to Dennis McAlpine, media analyst at Josephthal Lyon & Ross.
     But he added that while there could be additional conflict as the merger works itself out, the deal appeared to cement the control of Time's Chairman Gerald Levin, over the combined enterprise. (80K WAV) or (80K AIFF)
     The deal was originally valued at $7.5 billion when it was announced Sept. 22, 1995, but Time Warner stock price has since slid in value.
     Commissioners Mary Azcuenaga and Roscoe Starek dissented in Wednesday's approval vote, arguing the government should not have demanded any changes in the merger.
     Pitofsky and Commissioners Janet Steiger and Christine Varney all approved the settlement.
     "While the proposed merger of Time Warner and Turner Broadcasting is one of the biggest and most complicated deals that antitrust officials have reviewed, the central issue it raises can be summarized in one word: access," Pitofsky said in his statement.
     The FTC majority said it feared that ties between TCI and No. 2 cable operator Time Warner would lessen competition. Turner, meantime, owns TBS Superstation, Cable News Network, CNN Headline News, CNN International, CNNfn, Cartoon Network, Turner Classic Movies, and Turner Network Television.
     The agreement, negotiated in July with the FTC, requires Time Warner cable systems to carry an independent all-news channel to compete with CNN, reaching at least half of Time Warner's subscribers within three to five years.
     That could mean access for MSNBC, the joint news venture between Microsoft and NBC, or the all-news channel currently in the works by Rupert Murdoch's News Corp.
     "It means one of them at least is going to be happy because he's going to get some carriage on something approaching 11 million consumers," said McAlpine.
     He noted, however, that there was no assurance that either two companies would get all the additional space, or even that another entrant might be carried. The agreement, he cautioned, says nothing about that.
     The settlement does limit TCI's investment in Time Warner to about 9 percent of the voting stock. TCI currently owns about 21 percent of Turner. Under the original merger contract, that stake would have become a 7.5 percent investment in Time Warner, and it could have been increased as high as 15 percent.
     Time Warner gained 1-7/8 to 37 in Thursday trading as news of the FTC's approval hit Wall Street, while Turner rose 1-3/8 to 27-3/8 and TCI dipped 1/8 to 15-1/8.Back to top


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