Sources close to Seagram confirmed last night that the company was indeed the buyer of a block of 1.5 million Time Warner shares last week at a price of about dollars 50m. The purchase, which will not show up in regulatory filings until next week, brings its stake to dollars 2.23bn, or 14.9 per cent of Time Warner - just shy of the 15 per cent level that will trigger a 'poison pill' defence put in place by Time Warner directors in January.
Rumours on Wall Street yesterday suggested that the companies had agreed on a friendly merger at a price of dollars 55 a share - valuing the debt-laden media group at almost dollars 21bn.
Some arbitrageurs argued otherwise, suggesting Seagram was positioning itself to profit from a takeover bid from Bell Atlantic, the telecoms group that recently called off a dollars 33bn merger with Time's main rival in the cable TV industry, Tele-Communications Inc.
Seagram has been accumulating its stake in Time Warner for almost a year in the open market, claiming its purchases are for investment purposes only.
The source close to Seagram said the firm, which is headquartered in Montreal but run from New York, was not preparing a hostile bid at this time.
But the buying apparently alarmed Time Warner, itself the product of a messy dollars 15bn 1990 merger that still weighs heavily on its balance sheet.
The posion pill, adopted when the Seagram stake hit 11 per cent, would make winning control, either via a tender offer or through a creeping takeover, prohibitively expensive.
Seagram's chief executive, Edgar Bronfman Jr, has long been interested in the entertainment industry, and his company has a history of aggressive investment in large profitable corporations.Reuse content