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Warner to Buy Lorimar in $1.18 Billion Stock Deal

May 10, 1988

NEW YORK (AP) _ Financially troubled Lorimar Telepictures Corp. has agreed to be acquired by Warner Communications Inc. in a stock-swap transaction worth about $1.18 billion, officials said today.

A merger between the two entertainment companies had been widely expected, since they have been engaged in on-again-off-again merger talks since early March.

Under the agreement between entertainment conglomerate Warner and Lorimar, a major television producer, 0.415 Warner common shares would be exchanged for each Lorimar common share.

The deal puts a value of about $14 on each of Lorimar’s 47 million outstanding common shares, for a total of around $630 million. In addition, Warner would assume Lorimar’s debt of about $550 million.

Lorimar earlier rejected a $770 million, or $17-a-share, takeover bid from Denver investor Marvin Davis, the former owner of Twentieth Century Fox Film Corp. Davis, who has indicated he may be willing to go higher, wasn’t immediately available for comment today.

Lorimar told Davis in mid-March that it would keep his offer in mind, but Lorimar spokesman Ken Lerer said today the company had no comment on whether that is still its position.

Lorimar stock fell 12.5 cents to $13 a share in midday trading on the New York Stock Exchange, while Warner declined 75 cents to $32.87 .

Lorimar would be able to terminate the agreement if the average price of Warner’s common stock doesn’t result in a price of at least $15 a share for Lorimar shareholders. Lorimar would not necessarily exercise such an option, however.

Another condition gives New York-based Warner an option to purchase 18.5 percent of Lorimar common stock at $15 a share. The option can be exercised if Lorimar accepts a higher offer from a third party.

The agreement requires the approval of each company’s board of directors, Lorimar shareholders and regulatory authorities. Under the deal, Lorimar Chairman Merv Adelson would join Warner’s board as vice chairman.

″The acquisition of Lorimar Telepictures ... will expand (Warner’s) already broad base of leadership in the entertainment industry,″ Warner Chairman Steven J. Ross said.

Analysts have suggested that Lorimar’s stock is worth between $14 and $20 a share.

Lorimar, based in Culver City, Calif., is a leading producer of original television programming, but in recent years has been troubled as its ambitious plans to expand into other areas disintegrated, sometimes causing the company to incur losses or heavy costs that depressed its earnings.

Lorimar produces such long-running TV series as ″Dallas,″ ″Knots Landing,″ ″Peoples Court″ and ″Love Connection.″ It has 12 hours a week of prime-time TV programming and 16 1/2 hours of syndicated programs.

For the first nine months of its current fiscal year, Lorimar posted a net loss of $82.6 million on revenue of $616.8 million. The loss included $45 million in writedowns on five movies and $22 million in reserves for possible future losses in its home-video subsidiary.

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