Turner marriage ambushed at altar

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The Independent Online
HAILED as a masterstroke by analysts on Wall Street when it was formally unveiled on Friday after weeks of negotiation, the merger between Time Warner and Turner Broadcasting System is already running into unexpected opposition.

If it is allowed to go through without interference, the deal, valued at $7.2bn (pounds 4.5bn), will allow Time Warner to retain its title as the world's largest enter- tainment giant, superseding even Walt Disney, which is on track to complete its own mega-merger with Capital Cities- ABC.

But Time Warner's chairman, Gerard Levin, and the mercurial founder and head of Turner Broadcasting, Ted Turner, are this weekend scrambling to head off a potentially troublesome challenge to their deal from US West, which holds a 25 per cent stake in Time Warner's entertainment division.

At the same time, the US Consumer Union has filed a formal petition to the Justice Department in Washington demanding that it blocks the merger, because it could give Time Warner unreasonable power to raise cable television rates.

As part of the merger agreement, the cable giant Tele-Communications Inc (TCI), which controls 21 per cent of Turner, will emerge as a powerful constituent within Time Warner, with 9 per cent of the company stock.

Under the deal, TCI will be granted no more than 5 per cent of Time Warner's voting stock, and it is far from certain that federal officials would see any reason to block the merger on anti-competitive grounds. "As far as the regulators are concerned, this deal gets nowhere near any of the limits that are existing," suggested Michael Botein, at the New York Law School.

The manoeuvre by US West, a regional telephone company with wide media interests, is potentially more troubling, however. On Friday, the company, which made a $2.5bn investment in Time Warner in 1993, filed a lawsuit in a Delaware court, contending that the integration of Turner into Time Warner would cause unacceptable conflicts of interest in the industry.

Commenting on the lawsuit, Richard McCormick, US West's chairman, said that the merger would "create innumerable conflicts of interest and violations of fiduciary obligations". Sounding a more conciliatory note, however, he said US West had had "continuing discussions with Time Warner about these issues since the Turner merger first surfaced" and remained open to futher discussions.

Mario Gabelli, whose Gabelli Funds hold 5 million shares in Time Warner, suggested that Mr Levin had perhaps been so intent on sealing the deal with Mr Turner that he had not properly involved US West in the process.