NEW YORK, Sept. 22 -- Time Warner Inc. and Turner Broadcasting System Inc. agreed Friday to merge in a $7.5 billion deal that will form a global media group spanning news, entertainment and information resources. Time Warner chief Gerald Levin, speaking at a news conference, referred to TBS head Ted Turner as his 'best friend' following five weeks of talks to hammer out a deal that will give the merged Time Warner more than $19 billion in annual revenues. 'There has been one person operating out of Atlanta who, I think, has been the formative genius, not only of the cable business but also of taking wonderful programs and linking them with terrific networks on a worldwide basis,' Levin said. 'This is a dream deal.' Turner, who also attended the news conference, will become vice chairman of the merged company and run the TBS assets, which include New Line Cinema and Castle Rock Entertainment; cable networks CNN, TNN, TBS and the Cartoon Network and the Atlanta Braves and Hawks teams. TBS will have two seats on the board, one occupied by Ted Turner, and Turner also will be in charge of Time Warner's highly profitable HBO pay-cable operation. Turner, who will own about 10 percent of Time Warner when the deal closes, noted his days as a maverick are nearing an end. 'We've always been a small company fighting the big guys. I'm looking forward to having some muscle on our bones for a change.' The combined company showcases some of the world's best known brands including Time, People and Sports Illustrated magazines, Warner Bros., and HBO.
It also encompasses some of the most widely distributed global products -- including the music of Warner Music Group, distributed to hundreds of millions of people worldwide, and CNN International, seen by viewers in 210 countries and territories. The merger joins the world's most popular cartoon libraries -- Warner Bros.' Looney Tunes and Hanna-Barbera Cartoons. It also reunites the pre-1948 Warner Bros. film library, owned by TBS, with the current Warner Bros. library. 'The complementary nature of the two organizations will allow us to maximize the value of our assets and distribution systems and position us as the leading media company in an increasingly competitive global marketplace,' Levin said. Within hours after the announcement, US West, which owns 25 percent of Time Warner's entertainment operations, filed its anticipated challenge in Delaware Chancery Court, seeking to block the deal on the basis that it would violate terms of US West's 1993 investment. Richard McCormick, US West chairman and chief executive officer, said the merger 'will create innumerable conflicts of interest and violations of fiduciary obligations.' For example, McCormick questioned how the new company would decide which of its studios would make a particular film, noting that US West will own a quarter of Warner Bros. but none of New Line or Castle Rock. But Levin said the US West claim is without merit. Time Warner executives have indicated they may file a challenge on the basis of alleged regulatory non-compliance by US West. Time Warner, which already owned 19 percent of TBS, has overcome one major obstacle to the deal. Over the past three weeks, Levin managed to crack initial resistance from Tele-Communications Inc., which owns 21 percent of TBS. The announcement disclosed that TCI has signed agreements to carry Time Warner and TBS services on its cable systems. Wall Street analysts believe the pact will be at prices that are highly favorable to TCI. TCI, which will own 9 percent of the merged company, also agreed that its shares will be placed into a trust with no voting rights. That strategy is not a surprise, since regulators are expected to take a hard look at the antitrust implications of the merger. John Malone, president and CEO of TCI, said, 'We've been partners with both TBS and Time Warner for years. We know both companies very well and that's why we were so enthusiastic about playing a role to make this deal happen.' The transaction is subject to, among other things, approval by the Federal Communications Commission and regulatory review by federal antitrust authorities, and approval by the shareholders of both companies. Ted Turner will become vice chairman of Time Warner and head of the Time Warner Video division which will consist of all the businesses of TBS plus have supervisory responsibilities over Home Box Office. As a result of the merger, which will be tax-free to TBS shareholders, Turner Broadcasting System will become a wholly-owned subsidiary of Time Warner Inc. Subject to certain conditions, Turner and Liberty Media Corp., a subsidiary of TCI, have agreed to vote their TBS shares for the merger. TCI has granted Time Warner an option to acquire TCI's TBS shares.