New Line Cinema Holding Merger Talks With Turner

New Line Cinema Corp. confirmed Friday that it is discussing a business combination with Turner Broadcasting System Inc., and sources said a preliminary agreement could be reached as early as next week.

But the deal--expected to exceed $300 million--would require approval by Turner’s powerful board, which nixed a $100-million bid for Financial News Network in 1989. Turner directors include three representatives of Time Warner Inc., which has taken a dim view of the proposed New Line acquisition.

“I’m not sure that we’re going to vote no; we haven’t made up our mind,” said one Time Warner insider. “We’re just asking the right questions, as any members of the board should.” Time Warner insiders insist that they are not fundamentally opposed to Turner’s entry in the motion picture business. Indeed, industry sources say Warner Bros. would be eager to distribute Turner movies if it acquires a production company such as Castle Rock, where merger talks are also under way.

But the combined acquisition of Castle Rock and New Line would pose a more formidable competitor, since New Line would have more commercial movies to distribute in addition to its low-budget fare. “For their own selfish interest, they don’t want another major (studio) formed,” one Wall Street analyst said of Time Warner’s opposition.

A New Line deal could set the stage for a showdown between Time Warner, Turner and Tele-Communications Inc., which also has three seats on the Turner board. Although TCI--the nation’s largest cable operator--has not signed off on a New Line deal, according to one source, it is believed to be more supportive of Turner’s foray in Hollywood.

TCI--run by the shrewd Chief Executive John Malone--is eager to secure access to cable television programming without exposing the company directly to Hollywood’s costly and unpredictable earnings.

“I think Ted (Turner, the chief executive) has a better relationship with John because John is more supportive. John’s agenda and Ted’s agenda are more aligned,” concluded one analyst.