Turner may stay on board

Feb 3, 2003  •  Post A Comment

When Ted Turner meets in New York this week with Richard Parsons, AOL Time Warner’s chief executive and chairman-elect, they will talk about a good many things-but not a hostile takeover of the beleaguered company.
Sources close to Mr. Turner say he likely will tell Mr. Parsons he intends to remain a vocal member of the board-something Mr. Parsons welcomes-despite his surprise resignation last week of his non-operational role as vice chairman. As the largest individual shareholder, Mr. Turner is not now planning an unsolicited run at AOL Time Warner or any of its operations-at least, not today, well-placed sources say.
Mr. Turner is expected to remain outspoken on such issues as improving the company’s stock price and maintaining the independence of the CNN service he created. “I have not come to this decision lightly. As you know, this company has been a significant part of my life for over 50 years,” Mr. Turner said in a prepared statement last week.
Mr. Turner, who is known for his unpredictability, could not be reached for comment about whether he is considering the sale of his 3.4 percent stake in the company, the proceeds of which could be used to meet his $1 billion pledge to the United Nations, made several years ago before AOL Time Warner stock lost 70 percent of its value.
“Anyone who has talked to him lately knows the notion that Ted would come charging back here to try and take over the company or buy back the Atlanta Braves or CNN is absurd,” said one high-level executive close to the company.
Speculation that Mr. Turner might join forces with potential suitors such as Viacom, General Electric or Microsoft Corp. failed to break a 20 percent decline in AOL Time Warner stock to below $12 a share, which came in response to the Jan. 29 announcement of Mr. Turner’s resignation and the company’s record $98.7 billion loss for 2002. Analysts said AOL Time Warner is a takeover target because it trades at about a 15 percent discount to other media concerns.
“He’s tired and he’s upset about losing nearly $6 billion of his own net worth tied up in AOL stock, but he wants to give Dick and the new management a chance,” said an executive close to Mr. Turner.
Mr. Turner, who is in the process of moving his legal residence to Florida, appears to be checking out of the daily fray, leaving the tough job of “fixing” the company’s AOL unit and balance sheet to Mr. Parsons and a conservative management team that has jettisoned the top AOL executives who engineered the January 2001 merger of America Online and Time Warner.
High-level industry executives said they believed Mr. Turner when, in a prepared statement, he said he was resigning his management post to devote more time to his philanthropic and other business interests, including a film company and a restaurant franchise.
Mr. Turner is close to Gordon Crawford, a senior VP at Capital Group’s Capital Research & Management who worked with John Malone, a 4 percent nonvoting shareholder, to oust AOL Chairman Steve Case. Mr. Turner may have hoped to be named chairman, but Mr. Parsons will assume that title when Mr. Turner steps down as vice chairman at the May shareholders meeting.
In announcing worse-than-expected 2002 results-even for some of its formerly stalwart Time Warner businesses-and a “no growth” forecast for 2003, Mr. Parsons pledged to reduce the company’s overall debt to about $20 billion in 2004 by using free cash flow and asset sales.
Those assets sales, which could come to include Time Warner Music, already involve the company’s stakes in Court TV and Comedy Central, its book publishing operations, sports teams including the Atlanta Braves and an $800 million stake in Hughes Electronics. Analysts value the music unit at about $11 billion and estimate the other assets already for sale could generate another $3 billion.
The America Online unit most likely would be spun off in a year if it can be rejuvenated. The continuing loss of value from the Internet operation resulted in a one-time $45 billion paper charge in the fourth quarter, although the Internet unit continued to heavily contribute to the overall company’s $4 billion in annual cash flow.
AOL Time Warner reported a $45 million net loss, or $10.04 a share, compared with a year-earlier loss of $1.8 billion, or 41 cents a share, on a 10 percent rise in revenues to $11.4 billion.
For all of 2002, AOL Time Warner reported a $98.7 million loss, or $22.15 a share, vs. a loss of $4.9 billion, or $1.11 a share, a year earlier on a 7 percent rise in revenues to $41 billion.
Standard & Poor’s said Friday that its BBB+ corporate credit rating on AOL Time Warner remains on “negative watch.” Analysts bemoaned the lower-than-expected results from cable television and music, and the lower growth rates at its cable networks that AOL Time Warner warned of for this year. The Time Warner businesses, which have bolstered the company, now are viewed as vulnerable.
As for the possibility of a union of CNN and ABC News, which Mr. Turner opposes, sources said Mr. Parsons and his management team will receive an internally generated report this month outlining the pros and cons of any merger. Such a move may now be more achievable without Mr. Turner vocally opposing it as a member of management.
According to parameters already ironed out, AOL Time Warner would own 70 percent of and manage the new entity, which would reside inside the corporation and would allow the companies to realize an estimated $250 million in annual cost savings, sources said. There is growing support inside AOL Time Warner for the move.
CNN and the Turner cable networks were among the few AOL Time Warner operations to report increased profits last year.