THE TIME INC. BATTLE : Paramount Scores Time’s Executives in Court Filings

Paramount Communications Inc., hoping to stop Time Inc. and Warner Communications Inc. short of the altar, made a number of harsh allegations in its written pleadings to a Delaware judge this week, including the suggestion that Time’s managers were prepared to adjust the company’s price to advance their own careers.

Hundreds of pages of documents became available this week in Paramount’s challenge to Time’s anti-takeover maneuvers. Paramount’s $200-per-share offer has been rebuffed by Time because Time’s directors maintain that the company isn’t for sale. Instead, Time prefers to press ahead with an acquisition of Warner.

A ruling in the case is expected by Friday, but until then, other lawyers, investors and reporters are searching for clues in the massive court filings.

In a real “page turner” of a brief, Paramount’s lawyers presented their version of Time’s recent corporate history, in which they claim Time’s top executives were preoccupied with fending off takeovers and preserving their own jobs.

Using excerpts from memos and depositions, Paramount recounted how Time’s chief strategist and general counsel, Gerald M. Levin, was charged with the task in 1987 of finding companies to acquire. If Time became larger, the reasoning went, it would improve its chances of remaining independent.

On Aug. 11, 1987, Levin sent a confidential memo to Time Chairman J. Richard Munro and president Nicholas J. Nicholas Jr., recommending that the company set a long-term goal of combining with Warner and Turner Broadcasting System. (Time has since secured an important ownership stake in Turner.)

With some irony, the Paramount legal team noted that Levin “concluded that if a union with Warner was not possible, Time should explore a combination with Paramount.”

Retirement an Issue

But talks did proceed with Warner in 1987, initially centering on a joint venture in cable, programming and films. By the summer of 1988, the focus shifted to a complete merger. Prior to a July 8, 1988, meeting between Munro and Warner Chairman Steven J. Ross, Levin “ranked as a top priority” the establishment of shared power between the two men, and the succession of Nicholas as co-chief executive once Munro retired, the Paramount brief said.

“Levin noted that although the exchange ratio for an exchange of Time and Warner shares should be based on market values, ‘We should be flexible’ if Ross agreed to share power and retire soon,” according to the Paramount account.

Time’s legal filings contained no direct response to this one point, but Levin was willing to respond in general terms Wednesday. “When you have an acquisition, there normally is a premium paid,” Levin said, adding: “We wanted Time Inc. to be the ultimate survivor.”

In August, 1988, negotiations broke off, largely because “Ross refused to promise to retire within five years after the merger,” the Paramount brief said. When talks began anew in January, the negotiating teams’ first issue was the matter of succession and the executives’ contracts. (Ross agreed to give up the co-chief executive’s job after five years but would continue as chairman for another five.)

Stock Swap Abandoned

Ross and Time’s three top executives each received 10-year contracts.

In their brief, Paramount’s attorneys strove hard to create the impression that Time was out-negotiated when it agreed to swap 0.465 of a Time share for each share of Warner.

The 0.465 ratio “was far more than Warner expected to get,” Paramount lawyers said. “In fact, Warner’s financial advisors advised Warner that anything over .40 was fair and anything over .45 would be ‘a hell of a deal.’ ”

(After Paramount made its cash offer, Time abandoned the stock-swap plan, which required shareholder approval. Instead, it decided to make its own cash tender offer for Warner--a move not subject to a shareholder vote.)

Among other things, Paramount claimed that Nicholas, Time’s president, “negotiated the final .465 exchange rate in one meeting. He did not have his investment advisor present.”

Levin responded: “The exchange ratio was arrived at through a process of intense negotiation designed to compensate Warner for the value of the assets that were being acquired . . . and (Nicholas) wasn’t alone.”