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May 16, 2003  •  Post A Comment

AOL Time Warner Approves Board Members

A potential showdown between some big AOL Time Warner shareholders and the media giant’s management was largely averted Friday as the slate of 13 nominated board members won approval at the company’s annual shareholders meeting.

Though the actual threat of a battle royale was relatively small, the vote grabbed attention after some big-name shareholders-upset by the company’s massive losses since the merger of AOL with Time Warner-said they would withhold their votes on five of the 13 nominees, and influential shareholder advisory service Institutional Shareholder Services recommended its clients not vote for the slate of directors.

The issue centered on whether AOL’s board was independent enough. Capital Research & Management, AOL’s biggest institutional shareholder, and Calpers, the nation’s largest pension fund, said it was not and made clear well before the vote Friday that they would not support electing several board members, including former Chairman Steve Case as well as directors Stephen Bollenbach, Franklin Raines, Francis Vincent, James Barksdale and Miles Gilburne.

The meeting in Landsdowne, Va., also gave Chairman-elect and CEO Richard Parsons an opportunity to repeat to shareholders that the company’s balance sheet “is strong now and is getting stronger.” He added that the company is “working hard to repair our credibility with investors,” but added, “we are a long way from bringing shareholders [the kind of stock performance] they expect and deserve.”

Comcast, Allen Talking System Swaps: A Comcast co-chief financial officer on Friday confirmed that the cable giant is negotiating with billionaire Paul Allen to find a way to avoid forcing Mr. Allen to pay $725 million for a stake that Comcast has in Charter Communications, saying the efforts focus on swapping some cable systems that Charter owns.

Separately, co-CFO Lawrence Smith said that the home-shopping channel QVC has little strategic value to the cable giant, potentially signaling a smooth sale of the channel to Liberty Media.

Philadelphia-based Comcast inherited the stake in Charter as part of its acquisition of AT&T Broadband last year. Terms of that stake require that Mr. Allen, the former Microsoft co-founder who is a majority shareholder in Charter, pay Comcast the $725 million by February.

However, in part because of the tax hit Comcast would face as a result of the payment, Comcast officials said they and Mr. Allen are coming up with a plan that minimizes the tax implications and limits the size of the check Mr. Allen might have to write.

“We’re working through it,” said Lawrence Smith, one of Philadelphia-based Comcast’s two CFOs, speaking during an analysts’ conference held in New York. He said that Comcast is “trying to get properties” from Mr. Allen, and added that there is a “50-50 shot we get it done.”

The payment has loomed large over St. Louis-based Charter, the nation’s No. 3 multiple system operator with 6.7 million subs. Charter grew sharply after Mr. Allen invested $7 billion in the company in the late 1990s to set into motion his vision of wired world. The company invested heavily in upgrading its infrastructure to offer customers high-margin products like video on demand and high-speed Internet access, but subscriber growth didn’t keep pace with the rate at which the company piled on debt.

On QVC, Mr. Smith called the channel a “financial asset” that “we don’t believe has any great strategic value” for Comcast, and that “we will do what’s right from a balance sheet and corporate finance view.” Mr. Smiths comments came a day after Liberty Chairman John Malone, in no uncertain terms, made it clear he wanted QVC.

Both Comcast and Liberty are awaiting an appraisal that was triggered after the two companies couldn’t agree on the channel’s value. Once that appraisal is complete, Comcast has 30 days to decide if it wants to buy QVC. If no decision is made, Liberty has a similar 30-day window. If neither makes a move, the channel goes up for auction.