Turner deal hits fresh snags

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The Independent Online
MATHEW HORSMAN

The controversial $7.5bn merger between Time Warner and Turner Broadcasting, which would create the world's largest entertainment company, ran into further opposition from institutional shareholders yesterday, following news that TBS founder Ted Turner stood to earn $100m in salary and bonuses over five years.

That dwarfs the remuneration package of Mr Turner's nominal boss, Gerald Levin, the Time Warner head who is set to become chairman of the merged group.

Mr Turner, who will hold the title of vice-chairman and continue to run his own broadcasting operations - including Cable News Network (CNN) - from within the new company, is to receive a salary of $5m a year, plus performance-related incentives worth up to $10m annually in addition. If he meets earnings and stock price targets, he would also receive options over 2.2m shares in Time Warner/Turner. Last year, Mr Levin earned a salary of $5.3m.

Mr Turner's package would come on top of the $2.6bn worth of Time Warner shares he is set to receive in return for his personal stake in TBS.

Time Warner said the salary was consistent with those paid other senior media executives.

Institutions had already expressed concern about a special deal offered to Tele-Communications International, the cable operator that holds 21 per cent of Turner, in return for its support for the merger.

TCI, the largest US cable operator, has received guarantees that it could broadcast programmes from the enlarged company for 20 years, paying a discount on established prices. That would eat into Time Warner/Turner's potential earnings from programme sales, institutional shareholders fear.

TCI also stands to win what several New York analysts were last night calling "preferential" treatment on an option to sell TCI subsidiary Southern Satellite to Time Warner for as much as $360m, more than twice its estimated current value, within the next six years.

These special arrangements were believed to be the key to winning the support of TCI chief exeuctive John Malone, a notoriously tough negotiator who controlled enough TBS shares to scupper the Time Warner/Turner merger.

The concessions have attracted criticism from US West, the telephone company which jointly runs an entertainment operation with Time Warner. US West has taken legal action in an attempt to overturn the mega merger.

Prospects for a legal battle involving TCI and US West have already had an impact on the two companies' UK operations, notably their jointly owned cable company Telewest, the country's largest cable operator.

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