Suitor May Buy Troubles With Turner Time Warner Taking Big Risk In Bid For Entertainment Giant

As Time Warner Inc. woos Turner Broadcasting System Inc., it may also be courting trouble.

Time Warner is hoping the Atlanta-based cable network and entertainment company will provide programming and distribution clout that could boost its listless performance.

But a swap of stock to buy Turner would dilute the holdings of existing shareholders, such as the Seagram Co., while introducing two forceful new voices as shareowners - cable moguls Ted Turner and John Malone.

By buying Turner rather than selling its stake in the cable company, Time Warner also is passing up the chance to take a big chunk out of its $15 billion debt.

Supporters of the deal say Time Warner will probably grow faster with Turner Broadcasting as its subsidiary than it would otherwise, and that the growth more than outweighs the potential problems a deal would create.

Time Warner would be getting a rich array of assets including the cable channels CNN and the Cartoon Network, extra movie and TV production power, a big movie library and the Atlanta Braves baseball team.

Time Warner’s vast cable television systems could carry the channels, while Turner’s networks could provide outlets for Warner Bros. cartoons, films and TV shows. In addition, CNN could benefit from ties to Time Warner magazines like Time, Money, Sports Illustrated and Fortune.

But the deal also carries risks for a company with a disappointing stock performance and a huge debt left over from the 1989 deal that saw Time Inc. combine with Warner Communications Inc.

Turner reportedly is in line to become vice chairman of Time Warner if the deal goes through, and it is unclear how he would function as second in command to Time Warner Chairman Gerald Levin.

The two have clashed in the past as Time Warner blocked Turner’s efforts to arrange a purchase of NBC from General Electric Co., and Turner never was able to match the $1.6 billion price Time Warner was once seeking for its 18 percent Turner Broadcasting stake.

Malone is one of the most powerful figures in the cable industry and heads Tele-Communications Inc., the industry’s largest cable system owner. TCI owns 21 percent of Turner Broadcasting.

He would be in the unusual position of controlling a piece of his biggest rival in the cable business.

Edgar Bronfman Jr., on the other hand, would see his Seagram Co.’s 15 percent stake in Time Warner diluted by a stock deal for Turner, and is said to be unhappy about the proposed deal.

Bronfman, who is chief executive of Seagram, was never been offered a seat on the Time Warner board despite being the company’s biggest single investor. He has held onto the Time Warner stake even after buying control of rival studio MCA Inc.

“There is the element of continuing drama here,” said Larry Gerbrandt, an analyst for the research firm Paul Kagan Associates.