Big Time Warner Investor: Sell Magazines, Buy Entertainment

By Ron Grover

It’s only a matter of time before the media industry consolidation begins. But when it does, Time Warner likely will be out there buying, according to its largest shareholder. Heavyweight media investor Gordon Crawford, managing director of the Capital Group, figures that Time Warner will continue to trim down and will eventually sell its huge magazine unit. That will allow it to begin to beef up its entertainment holdings, said Crawford, whose fund owns 7.2% of Time Warner, according to its most recent proxy filing.

“Time Warner just spun out their cable division, they’re going to sell their print division, and they’re spinning off AOL,” Crawford told a roundtable discussion at the USC Annenberg School for Communications, “They’ll then have Warner Brothers, HBO and the Turner Networks and they’ll probably be buying stuff in their wheel house.”

When it goes shopping, Time Warner won’t likely stray from its “core competency” of creating films and TV shows and owning the TV networks that distribute them, said Crawford, who is known to counsel media executives whose companies his funds own. The investor didn’t say which companies he expects to Time Warner to pursue or when. But he predicted there “will be a winnowing process” in which weaker media companies would be gobbled up.

Crawford’s comments feeds into speculation, which Time Warner has tried to tamp down, that the media giant is itching to use some of the $7 billion on its balance sheet to acquire companies that have been beaten down by the current recession. One of those mentioned often is debt-hobbled MGM, the fabled but faded movie studio that has recently sent its chairman Harry Sloan packing and brought in restructuring expert Stephen Cooper to seek additional capital. Warner’s name also pops up often when talk turns to NBC, although its owner General Electric has so far said it has no intentions of selling. Crawford appeared at the roundtable with former News Corp. president Peter Chernin, who said he expected there to be a “great consolidation” down the road, as the weaker companies among the larger players decide to sell rather than continue to lose market share. “The ones that will get destroyed first are the under-performers and these will be large companies,” said Chernin, without naming them.

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