Even in the era of the megamerger, this one was remarkable. No wonder the press and public were fascinated by the announcement that Time Inc. and Warner Communications would join to form the world's largest information and entertainment company. From Tokyo to Paris to Hollywood, media moguls sized up the new firm, trying to gauge its potential clout in the increasingly fierce international battle for the attention of readers, filmgoers and television viewers. The New York Times proclaimed that the union would "insure Time Warner a place in the 1990s as one of a handful of global media giants." Declared the Chicago Tribune: "The deal creates a corporate dynamo." In Munich the daily newspaper Suddeutsche Zeitung disagreed, predicting that the union would be a "Tower of Babel." And on Wall Street, where there had not been much excitement since the contest for RJR Nabisco, investors and speculators were agog over the proposed $9.5 billion exchange of Time shares for Warner's -- the largest stock swap ever.
The merger, which will result in Time Warner Inc., had a lot going for it. Who, after all, would have the money or the fortitude to stand in the way of a solid agreement between two of America's biggest companies? Yet Time and Warner have long been considered takeover targets, and speculation arose that a raider might go after one of them soon, before a merger could create a nearly invulnerable behemoth. Everyone from Rupert Murdoch to Warren Buffet, the shrewd Omaha-based investor, was mentioned as a possible buyer. But no suitor had come forward by week's end. Time's shares gained 6 5/8 for the week, to close at 115 3/4, and Warner's rose 2 7/8, to 48 3/4.
Time Chairman Richard Munro and Warner Chairman Steven Ross, who agreed to share power as co-chief executives of the new company, were confident that their deal would withstand any challenges. Said Munro: "We are not for sale." Time President N.J. Nicholas will take Munro's slot as co-chief executive of Time Warner if Munro retires in 18 months as planned. To strengthen their position, the two companies have also agreed to exchange some 10% of each other's stock in advance of the merger.
One big question mark is the stance of Herbert Siegel, the president of Chris-Craft Industries, which is Warner's largest shareholder, controlling 19% of the company's stock. He and Ross do not get along, largely because Siegel disapproves of the way Warner spends money on generous executive compensation (for Ross alone in 1987: $4.5 million in salary and bonus) and corporate amenities like the six-bedroom Acapulco villa for entertaining movie stars. Siegel also apparently believes that Warner is being undervalued in the merger agreement. When the proposed deal came up before Warner's board for a vote, Siegel abstained, while all the other members approved. Time and Warner officials, who are trying to convince Siegel of the merger's merits, admit that he could take legal steps to delay the transaction, but they insist he cannot stop it.