MALONE BLESSES TW-TURNER UNION

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TCI President-CEO John Malone says he is content being "a large, friendly, long-term shareholder" of a combined Time Warner and Turner Broadcasting System, interested only in protecting TCI's programming edge.

In an interview with Electronic Media last Friday, Mr. Malone said he has no intention of seeking control of Time Warner after it acquires TBS in a $7.5 billion stock transaction next year.

TCI, TBS's largest shareholder, will be the second largest shareholder of the combined company behind TBS Chairman Ted Turner, who will be Time Warner's vice chairman.

"Under no conditions are we seeking control or influence over Time Warner," said Mr. Malone. "....We are going totally passive. We will have no control. All the voting shares we have.... will be placed into a personal irrevocable voting trust for [Time Warner Chairman] Jerry Levin."

"In our opinion, that makes Jerry and Ted a team because Ted has his shares and Jerry has our shares," Mr. Malone said.

The deal's complex terms and structure prohibit TCI and its executives from exercising any control or influence in the combined company, to satisfy federal regulations and antitrust concerns. Together, TCI and Time Warner provide cable TV services to about half of all U.S. TV households.

Mr. Malone said he or any other TCI executives cannot sit on the Time Warner board or have any active involvement.

He said TCI's preferred shares of Time Warner held in the trust could be converted into common shares if TCI sold its position or if TCI sold Liberty Media Corp., the programming subsidiary that holds TCI's interest in TBS.

Mr. Malone said any future Time Warner stock TCI acquires would also be placed in the trust.

TCI "could pull the stock out of the voting trust if the need arises. But that's very unlikely," he said.

He said if outside parties attempt to interfere with the proposed merger, Time Warner has the option to buy TCI's 15% stake in TBS by acquiring an operating arm of Liberty. Such a tax-free deal would only require approval by the Time Warner board, he said.

TCI has right of first refusal to acquire what would be Mr. Turner's 11% interest in Time Warner-TBS should Mr. Turner ever decide to sell, just as Mr. Turner would have the first right to buy TCI's 9% Time Warner stake.

Mr. Turner and TCI will have a nearly 20% combined stake in the new Time Warner. Seagram Co.'s 14.9% Time Warner stake will be reduced to about 10%.

In meetings with Wall Street analysts and the media, Mr. Levin and Mr. Turner praised Mr. Ma-lone for playing a critical role in making the deal happen.

Mr. Malone negotiated a bevy of favorable terms for TCI. Besides a premium that Time Warner will pay to TCI shareholders in the form of a higher conversion rate and preferred shares, he got 20-year carriage agreements for TBS product on TCI cable systems.

Mr. Malone said he could help resolve the differences between Time Warner and US West, which came to a head Friday in a lawsuit US West filed to block the deal.

The agreement is the third recent big media deal. Earlier, Capital Cities/ABC announced it would acquire Walt Disney Co. for $19 billion and Westinghouse Electric Corp. said it would buy CBS for $5.4 billion.M

Ms. Mermigas is financial editor of Electronic Media.

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