Forget James Frey: SEC Filing on Time Warner is the Hot Read

Bruce Wasserstein Recommends Splitting Company Into Four Parts

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Today's book review is "The Time Warner Story," by Bruce Wasserstein. It's a sad tale that could have a happy ending.

"It is a difficult story to tell," Wasserstein writes, "because the history and performance of the company has been so skillfully enshrouded in the fog of one of the largest public relations efforts in American history. ... Success is heralded as triumph; failures are trumpeted as success. A corporate mythology is spun... Some facts are simply obscured."

That's from the second paragraph of a gripping nearly 350-page tome. You just don't want it to end. Actually, after reading the book, you probably do want to see it-Time Warner-end.

All this comes from the report that Mr. Wasserstein and his minions at Lazard Freres released and filed with the SEC for the Time Warner Extreme Makeover, Carl Icahn Edition. The scheme: Split into four companies (movies/TV, cable systems, Time Inc., AOL); fire lots of people; and borrow billions to buy back stock, increasing the net debt load by 72% and sinking the credit rating to just above junk.

It's not a real book, but it's worth reading-and highly readable. It nicely sells a logical solution: Restage the floundering media conglomerate into four focused firms, each ready to chart a path that could include-shocking-more acquisitions or a sale to a rival.

The conciliator

The report is as close as an SEC filing can get to an "E! True Hollywood Story." Mr. Wasserstein tells how Jerry Levin snatched the CEO job away from a CEO-to-be who was vacationing in Vail, and how AOL's Steve Case "came to loggerheads" with Levin. In the "Who is Mr. Parsons?" section, he shows how the "affable, well-liked" Dick Parsons, the current CEO, plays the role of conciliator.

Mr. Wasserstein chronicles the "contradictions and missteps" and "missed opportunities" with "what is arguably the premier collection of media assets spanning the traditional and new media sectors." He spins a nasty tale of this "corporate inferno" by culling from such media authorities as The New York Times, Ad Age and the Muskogee Daily Phoenix & Times-Democrat, all duly footnoted.

He says the stock could be worth as much as $26.57 if Time Warner takes his advice; it sold for $18.32 a share on Friday (and $83 in '00). Under his scheme, Time Warner's $107 billion enterprise value could increase by about $40 billion. Mr. Icahn's group, with its 3.3% equity stake, would gain something like $1.3 billion (quick math: 3.3% of the value increase). Mr. Wasserstein gets $5 million plus a cut of Mr. Icahn's profits.

Part of the exit strategy: Move out of the opulent new One Time Warner Center. Mr. Wasserstein says the company has 3.8 million square feet of real estate in Manhattan. That's equivalent to 10% of Central Park. He figures Time Warner could save $88 million a year by moving to cheaper digs. Jersey City is nice.

Considering the 350-or-so page length of the document, Wasserstein still falls short on some details (just how will Time Warner slash corporate overhead by 78%?) and probably too aggressive on some claims (will Time Warner Cable really trade at a premium to Comcast?). But this book packs substance into Mr. Icahn's fix for a bumbling giant, offering a compelling point of view on Time Warner's past, present and (maybe) future. If you're only going to read one SEC filing in 2006, this is the one.

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