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Time Warner merger terms approved

NEW YORK -- Time Warner Inc. said Wednesday it will pay for the balance of shares in Warner Communications Inc. with convertible preferred stock and stock in BHC Communications Inc., a broadcast subsidiary of Chris Craft Industries Inc., to complete the $14 billion merger of the entertainment companies.

The board of Time Warner Inc., formerly Time Inc., and the board of Warner Communications Inc. unanimously approved the terms of the $70-a-share, all-equities acquisition of the remaining 86.8 million shares of Warner common stock.

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In completing the merger, Time, which already purchased 100 million shares of Warner common stock at $70 a share in cash, will have purchased all of Warner's outstanding common stock for 62 percent cash, Warner's interest in BHC Communications, and 38 percent convertible preferred stock with an average conversion price of approximately $210.

The acquistion will cost Time Warner $5.3 billion for the issuance of the preferred stock and $8.7 billion for the cash and cash equivalents of the BHC stock. Warner Communications Inc. held a 40 percent interest in BHC, which will be closed out as a result of the transaction, a Time Warner spokesman said.

'From the first, our strategic goal in combining Time and Warner has been to create a formidable U.S.-based media and entertainment company with the strength and resources necessary to compete against anyone, anywhere in the world,' said Time Warner co-chairmen J. Richard Munro and Steven J. Ross in a joint statement.

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'We have designed an overall financial structure with a balance of debt and equity that will allow us to build our businesses, capitalize on new opportunities and challenges worldwide, and ensure growing value for our shareholders,' they said.

A Delaware Chancery Court judge approved the merger, creating the world's largest media and entertainment conglomerate, earlier this summer after Paramount Communications Inc. unsuccessfully mounted a hostile bid for Time.

Upon completion of the merger, each share of Warner common stock will be converted into a combination of securities with a per-share value of $70 or an aggregate value of $6.075 billion, consisting of Time Warner exchangeable convertible preferred stock convertible at $200 a share with a liquidation value of approximately $35; Time Warner exchangeable convertible pay-in-kind preferred stock convertible at $225 a share with a liquidation value of approximately $26; and common stock of BHC, Time Warner said in a statement.

Holders of the approximately 86.8 million shares of Warner common stock outstanding will, on an aggregate basis, receive Time Warner exchangeable convertible preferred stock with a total liquidation value of approximately $3.05 billion; Time Warner exchangeable convertible pay-in-kind preferred stock with an approximately $2.3 billion liquidation value; and 12 million shares of BHC common stock with a value of approximately $725 million.

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WCI shareholders also will be entitled to interest of 9 percent after Aug. 26, less any cash dividend paid by WCI, until the merger is consummated, Time Warner said. The interest is payable in the form of additonal shares of both preferred stock.

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