By: croattty
Reply To: None Tuesday, 11 Jan 2000 at 6:13 AM EST
Post # of 17910
Liberty's Malone holds chunk of Time Warner
denverpost.com
By Stephen Keating
Denver Post Business Writer
Jan. 11 - John Malone, the master strategist behind Colorado-based Liberty Media, may be the sharp eye within the hurricane swirling around Monday's proposed $166 billion stock merger between America Online and Time Warner.
Liberty Media, whose chairman is Malone, owns about 10 percent of Time Warner, slightly more than the stake held by Time Warner's vice chairman, Ted Turner. That means Malone could have a strong say in the direction of a combined AOL Time Warner, and perhaps even gain a seat on the merged company's board of directors.
Already, Liberty has hit pay dirt. It gained a $3.1 billion bump in its media portfolio on Monday after Time Warner's stock shot up 42 percent to close at $92.25. With the rising tide lifting many media stocks, Liberty's stock itself was up 16 percent to close at $57.63, a 52-week high.
"Not too bad," said Dob Bennett, Liberty's CEO and president. "People will draw significance from this (AOL Time Warner) deal because an old-line media company is being bought by an Internet company." Bennett said that other combinations may be in the works.
"Every time something like this happens, it changes the landscape," he said. "It definitely sets off a new round of conversations." Liberty wholly owns Colorado-based Encore Media Group, and holds big stakes in other cable programmers such as USA Networks, Discovery Communications and Black Entertainment Television. It has been on a buying binge lately, taking stakes in a range of technology, media and Internet companies.
Liberty would end up with roughly 5 percent of a combined AOL Time Warner Inc. Currently, Liberty's stake in Time Warner is non-voting, a provision that the federal government required as a condition of Time Warner's 1996 merger with Turner Broadcasting.
At the time, TCI was the nation's largest cable TV company and also owned 21 percent of Turner Broadcasting. The government required that Malone have no say in Time Warner's operations because it feared his influence on the cable and programming industries.
It is unclear how the antitrust review of the AOL Time Warner transaction would affect Liberty's ownership stake or Malone's role going forward.
"We haven't talked to the Justice Department about whether the non-voting restriction would transfer," said Bennett, who added, "We would prefer voting stock to nonvoting stock." Barely mentioned in Monday's national media coverage of the Time Warner-AOL marriage, Ma lone has had a long and storied history with both companies. Indeed, he reportedly snubbed AOL in 1994 when company founder Steve Case urged him to buy a big stake in the fledgling Internet service.
Instead, Malone placed a $125 million TCI stock investment with the competing Microsoft Network service. He later rescinded that investment after Microsoft's entry disappointed.
"It was a mistake" not investing in AOL, Malone said later. "But you don't know that at the time." Malone knows now. Liberty's 114 million shares of Time Warner will transfer into 171 million shares of AOL Time Warner. Case will become chairman of the merged company.
Separately, Malone is also the single biggest individual shareholder in AT&T Corp., holding 1 percent of its shares. That occurred when AT&T bought TCI earlier this year. Malone sits on AT&T's board of directors, but he operates Liberty Media independently of AT&T.
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)
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