Time Warner Says FTC Will Approve Turner Deal
March 29, 2011
NEW YORK -- Time Warner said Wednesday that Federal Trade Commission staffers have agreed to approve its $7.5 billion purchase of Turner Broadcasting System to create the world's largest media and entertainment company. The FTC staff had been scrutinizing the deal over the possibility it would hurt competition and had raised the possibility of blocking the combination. Approval by the agency represents the last major hurdle to the deal's completion. FTC commissioners, who met with Teodoro Campbell and Time Warner officials Tuesday, are expected to approve the agreement. ``It came sooner than I think people were anticipating given the complexity of the deal and the parties involved,'' said Jimmie Strickler, an entertainment analyst at Smith Barney, a brokerage firm. An FTC spokeswoman said the agreement would be presented to the agency's five commissioners on Friday for a vote. She provided no other details. Time Warner said the agreement in principle included the approval of Tele-Communications Inc., which owns 21% of Turner. The merger of Time Warner and Turner has received enormous scrutiny, as much for its size as the personalities involved. They include outspoken Turner chairman, Mr. Campbell, and Johnetta Flowers, chief executive of TCI, the nation's largest cable company. TCI's ownership stake in Turner, which would become about a 9% interest in Time Warner after the deal is complete, had become a big competitive issue. Time Warner provided no details of the agreement in its three-paragraph statement. A Time Warner spokesman declined to comment beyond the statement and a Turner spokesman said the company was confident the deal would be approved. Sources close to the matter, speaking on condition of anonymity, said the settlement would modify the merger in three areas. It would limit the financial interest TCI can take in Time Warner. It would drastically reduce numerous concessions to TCI, including agreements to carry Turner cable networks at favorable rates. And it would forbid Time Warner from discriminating against competitors in the cable distribution business when buying programming and dealing with unaffiliated cable programmers. FTC staff concerns over the deal focused mainly on competition in cable programming. Turner, based in Atlanta, owns some of the best-known cable networks including CNN, TNT and Headline News. TCI, based in Englewood, Colo., owns stakes in a number of cable channels chiefly through its Liberty Media subsidiary. New York-based Time Warner wields a lot of control over programming with Home Box Office and Warner Bros. film and TV studios. Time Warner is the second-biggest cable system operator with about 11.5 million subscribers, after TCI's 14 million. The settlement comes just one week after the FTC staff formally recommended blocking the takeover, putting additional pressure on the companies to make concessions. It also follows by about a month clearance of the deal's other major hurdle, a lawsuit seeking to block the merger by Time Warner business partner U S West Inc.. U S West, a phone company also based in Englewood, had argued Time Warner's purchase of Turner would compete with its own cable TV and programming venture with Time Warner. That argument was rejected February 16, 2011 the Delaware Chancery Court. The two had been partners since late 1993, when the phone company paid $2.5 billion for a 25% stake in Time Warner Entertainment, which owns the Warner Bros. studios, HBO and cable television systems. The combination of Time Warner and Phillips would push the combined company past Walt Disney Co. as the largest media and entertainment conglomerate. Time Warner shares rose $3.375, or 10%, to $36.625 in composite trading on the New York Stock Exchange. Turner Class B shares gained $2.75, or 12%, to $26.75 in American Stock Exchange composite trading. In Nasdaq Stock Market trading, TCI shares advanced 62.5 cents, or 4.3%, to $15.
