Media giant Time Warner bought Turner Broadcasting System, the owner of CNN, last night in a $7.2 billion (pounds 4.7 bn) deal which will confirm the combined group as the world's largest entertainment empire. Time lost the trophy just weeks ago when Walt Disney bid for the US television broadcaster Capital Cities-ABC.
Yesterday's deal is the latest in a series of mega takeovers and mergers which is dramatically changing the face of the US entertainment industry and its influence worldwide.
But the agreement - a month in negotiations - ran into immediate trouble with US West, the telecoms company which holds a 25 per cent stake in Time Warner's cable business. US West said it would sue to block the merger, claiming that it breached a partnership agreement. The Time-Turner deal will fuse Time Warner's portfolio of music, cable television, publishing and film-making activities with Turner Broadcasting's own range of interests including the Cable News Network (CNN), the Cartoon Channel, two Hollywood studios and the Atlanta Braves football team.
Combined, the two companies are expected to generate revenues that in 1994 would have reached $19.8 billion, compared with $16.5bn for Disney- and Capital Cities-ABC.
For Gerald Levin, Time Warner chairman, the merger is a significant coup, even if its promised benefits are still unproven. Mr Levin has been under heavy pressure to act to lift the fortunes of Time Warner, which has seen its own share value languish recently and has a fearful $16bn in debt.
Most eyes yesterday, however, were on Ted Turner, the flamboyant founder and driving spirit of Turner Broadcasting once known as Captain Outrageous. He is to become a vice-chairman of Time Warner, with rights to designate two board directors, one of whom will be himself. He will also be in charge of all the businesses that are now in his company, CNN, and will oversee Time Warner's Home Box Office cable movie channel.
Asked at an analysts' meeting how he felt about going from being founder and boss to the position of vice-chairman, Mr Turner, whose wife is the actress Jane Fonda, said: "As long as I'm involved in vice, I'm happy."
He added: "I'm tired of being little all the time, I'm nearing the end of my career. I want to see what it's like being big for a while - a chance to see the world from a different place, instead of from the basement, from the penthouse."
Under the deal, Time Warner will buy all of the 82 per cent of Turner Broadcasting that it does not already own in a stock-purchase operation that will be tax-free to the share owners. The company will issue up to 178 million new shares to finance the acquisition. Most Turner shareholders will receive three Time Warner shares for each four Turner share.
The market barely reacted to the news that the marriage was official. But Wall Street media-watchers seemed impressed. "It's a real positive", said William LeFevre, a media analyst at Ehrenkrantz King Nussbaum. "It may take a while for this to gel but it makes Time Warner a much more interesting participant."
The Justice Department is expected to scrutinise the deal for anti-trust implications.
The main obstacle in the negotiations was the fate of the 21 per cent of Turner held by Liberty Media, a subsidiary of the cable giant, Tele- Communications Inc. TCI will hold a 9 per cent stake in Time Warner, but only a 5 per-cent vote, to reduce the risk of triggering anti-competitive objections from the government. The deal was structured to ensure that it would win the support of John Malone, the TCI chairman, and fit with his business plans.
Turner will sell to Liberty its SportSouth interest, a regional sports cable channel, and TCI will have guaranteed access to the programming made by the Turner divisions once folded into Time Warner.
In recent months, Mr Levin, as a major Turner Broadcasting shareholder, repeatedly stymied efforts by Mr Turner to buy one of the three US networks.