NEW YORK - Just one day before shareholders vote on its purchase of Turner Broadcasting, Time Warner unveiled additional cost-cutting goals that could eventually double the $300 million in savings already planned.
Further, the big entertainment company said it would like to halve its debt, which will total $17.5 billion after the deal is done.
The two initiatives were outlined by Time Warner chairman Gerald Levin and its incoming vice chairman, Ted Turner, in a private meeting Wednesday with Wall Street analysts. They could go a long way toward appeasing investors unhappy with Time Warner's long-term stock performance.
"These are clearly ambitious plans and it will take a fair amount of time to work through the complexities of all these issues," said Jill Krutick, a media industry analyst at Smith Barney who attended the meeting. "But clearly it should be construed positively by shareholders."
Wall Street seemed to agree. Time Warner's stock rose more than $1.12 by late afternoon to $41.25 on the New York Stock Exchange.
At the analyst meeting, Krutick said, Levin disclosed a proposal, which he would present to the board before enacting, to make additional corporate cuts at Time Warner. In total, he explained, they could exceed the $300 million in savings originally planned from the merger.
But he did not elaborate, she said, on exactly what the cuts would be or over what period they would occur.
Job reductions had already been expected following the merger and the new cuts could easily lead to more. "Time Warner's a fairly far-flung organization with, arguably, duplication of efforts in a variety of areas," Krutick said.
Of the $300 million in savings originally planned, about one-third is to come from the conversion of Turner's TBS Superstation to regular-station status and the rest from revenue growth and cost cutting.
A second securities analyst, speaking on condition of anonymity, confirmed Krutick's recollection of Levin and Turner's comments. Edward Adler, a Time Warner spokesman, said Time Warner would not comment on the private meeting.
On the issue of debt reduction, Krutick recounted, Ted Turner told the group Time Warner would like to slice its borrowings in half and Levin explained that could be accomplished by giving up some aspect of its cable-system ownership.
"We know that they wanted to de-leverage but they never really put numbers on it as far as I know," she said.
Time Warner's cable systems, which reach 11.8 million subscribers and rank as the nation's second-largest collection, are mostly owned through a partnership with U S West Inc., a phone company.
Investors want Time Warner to dissolve the partnership, which is complex and makes the company hard to analyze. There have been negotiations between the two partners to do so, but they apparently always fell apart on the issue of control.
Levin recently signaled he might be willing to soften on that point and cede control of the systems if they were spun out into a separate company owned jointly. With such a spinout, Time Warner would also place some of its debt into the new company, thereby reducing its own borrowings.
Shareholders of both companies are set to vote on the deal Thursday in separate meetings in the same auditorium where Levin and Turner shook hands and first announced their merger on Sept. 22, 1995.
Approval is widely expected and officials expect the deal to be completed shortly afterward, barring unforeseen delays.
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