MALONE KEY TO TIME WARNER-TBS DEAL

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A tentative accord for Time Warner to acquire Turner Broadcasting System in an $8.5 billion stock swap late last week appeared to hinge on appeasing Tele-Communications Inc. President-CEO John Malone.

The TBS and Time Warner boards were expected to vote separately Sept. 5. The wild card is Mr. Malone. TCI is TBS' largest outside shareholder with a 21% stake; Messrs. Turner and Malone and Time Warner collectively control 77% of the voting stock.

Time Warner, TBS and TCI officials declined comment.

At press time, Time Warner, TBS and TCI lawyers were hammering out details of the complex agreement.

Mr. Turner appears eager to settle for $3 billion in Time Warner stock for his TBS holdings, two TBS seats on the Time Warner board and the vice chairmanship of Time Warner, with the promise of autonomy.

The unpredictable and shrewd negotiating tactics of those involved, and the protracted dealmaking process, fostered some wild speculation. Some industry watchers were betting counterbidders such as NBC owner General Electric Co. would emerge.

Potential stumbling blocks include:

Other concessions Mr. Malone may seek.

The eventual appointment of a Time Warner executive-possibly Jeffrey Bewkes, CEO of its HBO operation-as president or chief operating officer of TBS, which Mr. Turner will oversee as Time Warner vice chairman.

Defining an expanded role for Mr. Turner, 56, who, with 11% of the world's largest media concern, would likely view himself as heir apparent to Time Warner Chairman Gerald Levin, 56.

Whether ceilings accepted by Messrs. Turner and Malone last week on how much Time Warner stock they can own are enough to satisfy concerns they won't move to exercise greater control over Time Warner.

Determining where Seagram Co., new owner of MCA, stands in its 14.9% interest in Time Warner and whether it will sign off on the deal.

Whether previous offers from GE Chairman Jack Welch and News Corp. Chairman Rupert Murdoch, and subsequent talks with TCI and TBS principals last week, could blossom into a full-blown counterbid.

The move by debt-heavy Time Warner, which has been trying to sell its 19% stake in TBS for more than a year, appeared an aggressive effort to head off GE, News Corp. and even TCI from nabbing any of TBS' valuable cable program services.

Time Warner's move on TBS was made partly in response to Walt Disney's proposed $19 billion acquisition of Capital Cities/ABC and Westinghouse Electric Corp.'s $5.5 billion acquisition of CBS, both announced last month, sources said.M

Ms. Mermigas is financial editor of Electronic Media; EM Reporter Jenny Hontz contributed.

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