American Express said Tuesday that it has agreed to accept a sweetened buy-out offer for its 50% owned cable-TV company and pointedly asked its partner, Warner Communications, for a quick and favorable response.
But Warner took no action Tuesday, saying it had not yet received the improved offer of $850 million in cash and assumption of $500 million in debt proposed by the nation's two largest cable-TV operators, New York-based Time Inc. and Denver-based Tele-Communications.
American Express stopped short of triggering a buy-sell agreement, which would force Warner to accept the terms or buy out American Express at the same price. But Tuesday's actions clearly bespoke the giant financial company's impatience with Warner in the 6-year-old joint venture known as Warner Amex Cable Communications.
According to sources, American Express is riled over Warner's failure to respond to a May 23 offer by Time and Tele-Communications to buy Warner Amex Cable Communications for $750 million in cash and the assumption of $550 million in debt.
At that time, American Express said it was "favorably disposed" to the offer and agreed to give the joint bidders exclusive negotiating rights for 20 days.
With that negotiating agreement due to expire today, American Express proceeded on its own to negotiate and sign a definitive agreement with Time and Tele-Communications, promising not to negotiate with other parties for 90 days, one source said. In addition to the sweetened cash offer, Time and Tele-Communications have promised to share the profits with Warner and American Express if the would-be buyers sell certain Warner Amex programming assets for prices above an undisclosed level.
Time and Tele-Communications have already announced that they plan to sell Warner Amex's 19% stake in Showtime/The Movie Channel, a pay-TV company that competes directly with Time's Home Box Office subsidiary. The two companies are also believed willing to sell Warner Amex's two-thirds stake in MTV Networks, which operates three other cable services.
The new proposal is believed to require that American Express offer to purchase Warner's half-interest if Warner continues to ignore the bid. Once the buy-sell agreement is triggered, Warner would have 20 business days in which to respond, one source said. If Warner meets the offer, however, American Express must sell and Time and Tele-Communications would lose the deal.
Warner, which first entered the cable-TV industry in 1971, has been loath to sell its holdings at a time when the losses are narrowing. But the New York-based entertainment firm has just regained its financial footing after two years of losses in the video-game industry and might not be able to afford to buy out Warner Amex on its own.
If Warner enlists a partner in an attempted buy-out of American Express, the most likely candidate would be Viacom International, one investment community source said. Viacom reportedly suggested earlier this spring that it was willing to buy Warner Amex for $710 million but, as of Tuesday, had not increased that offer, two sources said.
At the center of the storm is Warner Chairman Steven J. Ross, who co-founded Warner 24 years ago and has often reiterated his faith in the long-term potential of the cable-TV industry. Ross, however, is caught in a battle with Warner's largest shareholder, Chris-Craft Industries, which has threatened to increase its 28.5% voting stake in the entertainment company that also owns the Warner Bros. studio in Burbank.
Chris-Craft disclosed last week that a Ross-led investor group wanted to buy out Warner's other shareholders, but those talks have broken off. In a filing with the Securities and Exchange Commission, Chris-Craft said it might align with other shareholders to "promote greater sensitivity of the (Warner) board . . . to stockholder interests."
Herbert J. Siegel, Chris-Craft's chairman, is known to have become exasperated by the two companies' clashing styles. Under Ross, Warner has often incurred sizeable debt to gamble on new ventures, while acquaintances characterize Siegel as cautious and less visionary. Siegel and two other Chris-Craft allies on the Warner board are considered unlikely to endorse a deeper investment by Warner in its cable-TV business.
Despite the reported Ross-Siegel rift, no fireworks occurred at a Warner board meeting Tuesday morning, one knowledgeable source said. Instead, some directors asked to be kept informed when the new Warner Amex bid is officially delivered to the company and set Aug. 9 as the new date for a shareholder meeting in New York, the source said. (Last week, the company said it had decided to postpone the June 27 annual meeting scheduled in Los Angeles.)
Since December, 1979, when American Express acquired a 50% stake in Warner's cable-TV holdings for $175 million, the giant financial-services company has invested a total of $350 million in the joint venture. Not until February, however, did American Express publicly admit that it might want to end the money-losing partnership.
WARNER AMEX CABLE COMMUNICATIONS AT A GLANCE A joint venture of Warner Communications and American Express, the company is nation's sixth largest cable-TV operator with 104 systems and 1.2 million subscribers. It has been hurt by the giant expense of building cable systems in big cities, such as Dallas and Pittsburgh. Warner Amex also owns two-thirds of MTV Networks, a music and children's cable-TV programmer, and 19% of Showtime/The Movie Channel, a pay-TV service.
As of Dec. 31 1984 1983 Assets $896.7 $1.07 million billion Long-term debt 415.2 846.3 million million