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Essay on Time Warner
Corporate instinct is a unique phenomenon that involves an ability to predict the direction of future business trends. Sensing a shift in the entertainment industry and feeling a need to advance a new business posture, in 1989, Time and Warner Communications announced their intention to merge.
Time's move of aligning itself with Warner presented it with several opportunities and advantages that made the merger attractive.
The leaders of Time believed that the merger would thwart a hostile takeover of their company. In addition, an agreement with Warner was in consonance with Time's financial agenda: both companies owned cable systems, produced feature-length films, and had various publication subsidiaries. Time owned HBO, and Warner owned one of the most successful record companies in the nation.
Apparently the merger between Time and Warner had been contemplated for some time, because the companies had already exchanged shares, with Warner owning 12.5 percent of Time, and Time 9.5 percent of Warner. According to the terms of the deal, Warner's owners were to hold 60 percent of the combined company. (Benjamin M. Compaine, Douglas Gomery, 2000)
Like other diversified media conglomerates, Time Warner has not been immune to the vagaries of an uncertain economy.
Servicing a massive debt of $8.8 billion while remaining sensitive to the concerns of shareholders became a difficult juggling act to sustain. Steven Ross's Time Warner found a solution to this problem when in 1991 the Toshiba Corporation and the Itochu Corporation announced a $1.6 billion investment in Time Warner, effectively acquiring 12.5 percent ownership in the company's cable, HBO, and film business, and resulting in a new limited partnership, Time Warner Entertainment. (Benjamin M. Compaine, Douglas Gomery, 2000)
The two Japanese companies are well-established multinationals: Toshiba and its consumer electronics boast annual sales of $33 billion, and Itochu, the world's largest....
