Time Warner Deal Could Choke Bidder

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If Seagram Co.-or anyone else, for that matter-mounts a hostile bid for Time Warner, it may very well be biting off more than it can chew.

A takeover of the world's largest media and entertainment company could ultimately carry a price tag of more than $20 billion and leave the victor shouldering a mountain of debt just as high, say industry analysts and observers. That would make it one of the costliest takeovers in corporate history.

Time Warner stock jumped 11% to $40 a share last week on rumors that Seagram is preparing to bid $55 a share to swallow the company whole. Seagram has been steadily acquiring Time Warner stock since last summer and now holds a 14.9% stake in the company.

Others that have surfaced as potential rival bidders or partners with Seagram include Tele-Communications Inc., Bell Atlantic Corp., BellSouth Corp. and U S West, the owner of 25% of Time Warner Entertainment.

Seagram has said it's interested in acquiring just 15% of Time Warner, and some believe that's exactly what will happen. Time Warner adopted a poison pill plan this year that kicks in at the 15% mark and is designed to flood the market with new shares in the event of a hostile takeover attempt.

"I don't think Seagram's would be so rash as to" attempt a hostile takeover, said John Reidy, media analyst with Smith Barney Shearson, New York. He estimated a bid for the outstanding shares of Time Warner stock would command at least $55 to $60 a share.

"That gives you a sale price of $22 billion to $24 billion," Mr. Reidy said, adding that Time Warner's existing $16 billion debt load would push the "real" price tag to nearly $40 billion.

"I don't think there'll be a deal," agreed Jay Nelson, a media analyst with Brown Bros. Harriman & Co.

One Time Warner insider predicted a takeover battle could ultimately push the sale price up to $70 a share, but the resulting debt "would eviscerate the company."

Even if it doesn't try to gain control of Time Warner, Seagram is likely to want a say in managing the company; many observers believe Seagram President Edgar Bronfman Jr. will seek a seat on the board soon.

Last week's rumors were triggered by DuPont Co.'s plans to issue $3 billion in debt securities over the next two years to refinance old debt. The speculation was that Seagram would sell back its 24.3% stake in Du Pont to pursue Time Warner.

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