TW names its poison

Time Warner Inc. adopted a poison pill takeover defense Thursday after being rattled by the continuing accumulation of its stock by Seagram Co. and prodded by institutional investors.

The so-called stockholder rights plan, through a complex triggering mechanism , would make it prohibitively expensive to acquire more than 15% of Time Warner’s stock.

Only a day earlier, Seagram disclosed it had picked up more than 5 million shares in recent weeks to boost its Time Warner stake to 11.7%. The Canadian spirits maker, which has steadily increased its stake from 5.7% since May, said it intends to acquire a 15% piece of Time Warner.

“The adoption of the rights plan in no way interferes with Seagram’s stated objective to acquire up to 15% of Time Warner stock as a friendly and supportive investor,” Time Warner chairman/CEO Gerald M. Levin said in a statement.

The company said “several institutional investors” raised concerns with company execs about the ability to gain control of the company in the open market without having to pay a premium.

Sources said those shareholders included the California Public Employees Retirement System (or Calpers), the nation’s largest pension fund, and US West Inc., the Englewood, Colo., Baby Bell that invested $ 2.5 billion in Time Warner Entertainment. US West said it supported the poison pill.

In a statement, Seagram said the plan does not appear to interfere with its ability to accumulate 15% of Time Warner stock. But the distiller said that “as a general matter, however, we believe that rights plans, or so-called ‘poison pills,’ can interfere with shareholder choice and adversely affect shareholder values.”

The announcement, though, pushed the value of Time Warner shares up. In New YorkStock Exchange trading, Time Warner shares closed at $ 40.25, up $ 1.13.

While so-called shareholders rights plans are often bad for shareholders, because they tend to protect management from takeovers, this one may be different, said Jessica Reif, an Oppenheimer & Co. analyst.

Usually, acquiring control of a company requires the buyer to pay a premium over current market prices. Seagram wouldn’t have to do that if it purchases stock piecemeal on the open market as it has been doing. But the TW plan compels any buyer to bid for the entire company if it wants control, a move that would surely force it to pay that premium.

“In this case, I think it’s favorable for shareholders,” Reif said. “The issue of getting a premium is key.”

But the move may be a bit alarmist, said Dennis McAlpine, an analyst with Josephthal Lyon & Ross Inc. Seagram was not likely to buy more than 15% of Time Warner’s stock since the company knows little about running a global entertainment and information firm.

“It strikes me as paranoia, and I don’t know if it’s justified,” McAlpine said.

And for all the hoopla of the announcement, it may ultimately mean little. Courts have the last say on anti-takeover devices. “And these things tend to get thrown out,” McAlpine said.

Seagram’s interest in Time Warner may not be as spurious as it might seem. Edgar Bronfman Jr., Seagram president and chief operating officer, has long been a Hollywood hopeful, ever since, at 17, he produced “The Blockhouse,” starring Peter Sellers. He produced a number of other films, including “The Border,” toplining Jack Nicholson, and he even wrote the lyrics to “Whisper in the Dark,” which Dionne Warwick recorded.

His father, Edgar Sr., Seagram chairman/CEO, has Hollywood ties that date back nearly three decades. In 1965 he tried and failed to gain control of Paramount Pictures. But two years later, Bronfman became a major shareholder in MGM, and by May 1969, he became chairman. Three months later, Kirk Kerkorian took a controlling interest in MGM, and Bronfman stepped down from the board.

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