Warner, Chris-Craft Settle; Way Cleared for Deal With Time

A settlement in the stormy five-year marriage between Chris-Craft Industries and Warner Communications Inc. was announced Monday, removing an obstacle to Warner’s announced plan to merge with Time Inc.

Time and Warner immediately set Friday, June 23, as the date for their respective shareholders meetings in New York. Proxy materials for both companies were cleared Monday by the Securities and Exchange Commission.

With the two developments, the stage is set for any challenge that might materialize to the Time-Warner merger. The proxies--due to be released in the next 48 hours--will provide a blueprint of the deal and the companies’ holdings, while the settlement frees Chris-Craft to do what it will with its 17% voting stake in Warner.

Barring any last-minute brawl, the resolution with Chris-Craft appears to end one of the more colorful fights in recent corporate history. Chris-Craft Chairman Herbert J. Siegel has resigned from the Warner board, while two Warner representatives resigned from the board of BHC, the Chris-Craft subsidiary in which Warner holds a 42.5% stake.

The often rancorous alliance was forged in late 1983 when Chris-Craft came to Warner’s rescue to fight off an unwelcome takeover bid by media baron Rupert Murdoch. Chris-Craft obtained a 23% stake in Warner in exchange for the 42.5% stake in BHC.

Within a year, however, relations soured as Siegel peered over the shoulder of Warner Chairman Steven J. Ross, who was already under pressure to cut overhead costs and sell assets because of massive losses in Warner’s video game business.

Siegel and Ross fought in the Warner board room and in court. At least twice, Chris-Craft won legal battles, and, in 1986, it revised its BHC deal to better protect its shareholders and gain more seats on the Warner board.

In 1988, Chris-Craft delayed Warner’s $1.3-billion acquisition of Lorimar Telepictures by four months--but in the end, Warner completed that merger and went on to negotiate its deal with Time, which will ensconce Ross in the chairman’s seat for the next 10 years.

Terms of Agreement

Under the terms of the settlement, Warner will offer to sell a portion of its BHC stock, lowering its stake to at least 19%. Warner has 45 days to determine the asking price, with the help of one or more of four investment banking firms the companies have agreed upon.

Chris-Craft then will have 30 days to exercise its right of first refusal, or it can require Warner to spin off its BHC stock after completing its merger with Time, distributing its BHC stock to Time-Warner shareholders.

Because the companies have agreed not to force a spinoff of the BHC shares until after the Time-Warner merger is completed, the terms of the stock swap between Time and Warner will remain unchanged. As the two companies announced in late February, Warner shareholders will receive 0.465 share of Time for each share of Warner common stock. At current market prices, the deal is valued at about $20 billion.

On the New York Stock Exchange, the price of Warner shares rose $1 to close at $52.375, setting a 52-week record. Time closed at $125.50, up 75 cents, while Chris-Craft also established a 52-week high by closing at $38, up $1.125.