They called it the dream deal, but it took a nightmare of negotiations for Time Warner Inc. to reach its agreement to acquire Ted Turner's empire.
Turner, the industry maverick who created cable TV's crown jewel, CNN, will sell Turner Broadcasting System Inc. and become a team player.The $7.5 billion stock swap marks the industry's third proposed megamerger in two months and would keep Time Warner a step ahead of the pack as the biggest in the business.
The reaffirmation that size and scope are the keys to success in the entertainment industry came in the same week in which AT&T Corp. decided to split in three because it had become too big.
But in entertainment, the catchword this summer has been bigger is better.
The Walt Disney Co. is buying Capital Cities/ABC Inc. for $19 billion, and Westinghouse Electric Corp. is acquiring CBS Inc. for $5.4 billion.
Time Warner's move to remain No. 1 in the face of Disney's expansion also means it will be hard for American households to avoid one of the industry's giants when they seek news or entertainment.
That's where the latest plan ran into opposition, almost immediately after it was announced.
The Consumers Union said it would ask federal regulators to block the Turner-Time Warner deal because it could mean higher cable prices and possibly prevent some cable programs from reaching viewers.
Meanwhile, Time Warner's telephone partner, US WEST, sued to block the deal, claiming it would improperly compete with the Warner Bros. moviemaking and HBO cable services that the utility owns in partnership with Time Warner. Gerald Levin, Time Warner's chairman, said the suit had no merit.
In addition, shareholder approval is required. Shareholders of Time Warner may not like the dilution of their holdings that will result by issuing up to 178 million new shares required for the deal. But Ted Turner, who is to become Time Warner's biggest shareholder with 10 percent, was upbeat.
"We think it is going to be great for the shareholders of both companies," Turner said. "I've basically put my entire life savings into Time Warner stock, and I'm looking for better than average returns."
The deal represents a bold gamble by Levin. He is betting that the marriage of Turner Broadcasting System's globally recognized cable networks with Time Warner's vast collection of entertainment and media production and distribution systems will boost earnings and revive Time Warner's listless stock.
On Wall Street, Time Warner rose 62 1/2 cents to close at $40.37 1/2 a share in trading on the New York Stock Exchange, but was still below the $42.37 1/2 of Aug. 29, the day before the talks were disclosed. Turner slipped 62 1/2 cents to $28.50 a share on the American Stock Exchange and had stood at $24 on Aug. 29.
The takeover through an exchange of stock had been valued at an estimated $8 billion when the talks first were disclosed Aug. 30, but the price tag shrank with the drop in Time Warner's stock.
There are attractions enough to keep both sides pushing to close a deal in the face of numerous obstacles.
Time Warner would get cable TV treasures like CNN and the Cartoon Network in the deal while adding the industry's charismatic pioneer as a major shareholder and vice chairman of the combined company.