Levin: `I'm Perfectly Willing To Be Run Out Of Town'
It's not easy being Time Warner Inc. Chairman Gerry Levin. When Michael Eisner bought Capital Cities/ABC Inc. for $19 billion to create the world's largest media company, Wall Street lavished the Walt Disney Co. chairman with praise. When Levin grabbed back the "world's largest" title with his $7.5 billion takeover of Turner Broadcasting System, all the business world could talk about was how long it would take for him to lose his job. Recently, Levin sat down with Media Editor Michael Oneal to defend both the deal and himself.
Q: Your joint-venture partner, U S West, and Turner co-investors Comcast and Continental Cablevision have challenged the deal. Any worries?
A: Not in the least. There are a lot of people who don't want this deal done. We have a very compelling transaction that has aroused a lot of emotion. We must be doing something right.
Q: Others have criticized the deal as dilutive. What's your response?
A: Of course the stock went down after we announced a stock transaction. But we've made a confident statement of how we're going to work through the dilution. The conversion of WTBS into a cable station will generate $100 million a year. And we can distribute a lot of Turner [product] for which they now sell off the rights. If I stopped right there, we'd work it off in a short period of time.
Q: Ted Turner and John Malone will both be major shareholders. Do they want your job?
A: Ted Turner isn't a Trojan horse. John Malone is a passive investor. He has given us his votes. And [his block becomes nonvoting] if something happens to me.
I'm radically changing the shareholding base of Time Warner to be media-oriented, and I think it's very healthy. You'll have 35% of the company owned by people with one thing in common--they understand the media business and the powerful nature of where it's going. It's a surrogate for when the Luces owned Time or when the Warner brothers owned that company. If you're a [major] shareholder, it's not that you'll automatically agree with me, but you'll understand the context. I'd be out in a second if I'm not delivering. But there will be an understanding that Time Warner is not some widget company.
Q: You've hinted that you want to get rid of Time Warner's management fiefdoms. How will you do that?
A: This transaction compels a kind of teamwork. In the past, I've never used the word "synergy" because there was more financial mileage in growing the individual businesses. The fact that Warner Bros. sold movies to HBO was nice, but that existed anyway, so there was no value creation there. Now, you have a Warner Bros. that is making cartoons for the Cartoon Channel. And instead of selling Lois and Clark into syndication, it should go on TNT or TBS. People will have to be paid and think in terms of: "How do I create value in these networks?"
Q: That's fine, but how do you actually change executive behavior?
A: Anyone who isn't on the team is out.
Q: Why didn't you do that before?
A: Had there been an economic reason to do it, I would have. Now the economic reason is so compelling, I'm not going to let anything get in the way.
Q: It's been said HBO chief Michael J. Fuchs is unhappy with his future role. What will he be doing?
A: People are picking on that, and it's a mistake. I've made it very clear that I'm not going to make the same mistake that we made with Time Warner--that is, we negotiated an organizational structure as part of the merger. There was no sensitive appraisal of the needs of the situation. [This time] no one has a fixed assignment. It's going to get worked out in an understanding fashion so that there is an organization that is less hierarchical and more team-oriented. I predict to you that everybody will be quite happy.
Q: You've been under fire since 1992. How do you deal with that?
A: My definition of myself is to do the right thing even if I make a lot of enemies. Time Warner was born into a cauldron of angst. At each step [since then] I've offended somebody--I've even made mistakes. But no one can accuse me of entrenchment or making a power grab for its own sake.
Q: People have said this transaction is designed to buy you time. Is it?
A: Buying time? I'd walk out this door in a second. I'd love to write the Great American Novel. I think this is a seminal transaction, but I'm perfectly willing to be run out of town if the performance isn't there. I finally want to make a clear break with the past because so far it has been nothing but people getting upset. It will never be the old Warner or the old Time again. It's going to be something totally different, as it must be. I believe I'm on the right track, and I'm very tenacious.
DEBT Time Warner's $18 billion debt load--largely left over from the 1989 merger--will be easier to carry thanks to Turner's rich cash flow. But it remains a huge drain that must be reduced.
SYNERGY? Infighting has prevented much cooperation between Time and Warner. Turner's assets fit neatly with Time Warner's on paper, but forging real synergy is another matter.
CULTURES Time Warner is comprised of fiefdoms where executives are paid a king's ransom to run bureaucracies. Turner is a scrappy, cost-conscious entrepreneurial company. Can they coexist?
SHAREHOLDERS Ted Turner gets 10% of Time Warner. TCI's John Malone and Seagram's Edgar Bronfman will both have 9% stakes. If Levin falters, he can count on pressure from this troika.
PARTNERS Levin has been struggling to restructure U S West's 25% investment in Time Warner's cable, studio, and HBO assets. Its legal challenge to the Turner deal complicates matters.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.