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Malone Enters Time Warner Fray

2/24/2006 7:00 PM Eastern

Time Warner Inc. chairman and CEO Richard Parsons was busy during the past few weeks trying to make corporate raider Carl Icahn go away. Just as he did, cable legend John Malone stepped in, moving to convert his non-voting Time Warner stock into voting stock.

That would give Malone a bigger say on what Parsons and company do next, in the wake of the six-month proxy battle.

Time Warner and Icahn settled their differences on Feb. 17, with Time Warner agreeing to boost its buyback of shares to $20 billion worth of its equity, to consult Icahn in naming two independent board members, to cut $1 billion in costs from the company by the end of 2007 and to consider the possible spinoff of more than 16% of Time Warner Cable. Earlier that week, Malone had filed documents with the Federal Trade Commission to convert his 4% nonvoting stake in Time Warner into voting shares.

Liberty Media Corp., of which Malone is chairman, revealed as much in a press release last week asking the FTC — which enforces U.S. antitrust laws — to let it convert the shares a year early.

Liberty acquired the nonvoting stock in 1997, as part of Time Warner’s purchase of Turner Broadcasting System Inc. Because Liberty owned a big chunk of Turner stock — and was then owned by Tele-Communications Inc., at the time the largest cable operator in the country — Liberty was prohibited from converting it into voting shares for 10 years.

But Liberty does not own cable systems in the United States anymore — it was spun off when TCI sold out to AT&T Corp. in 1999 — and believes it should be allowed to convert its Time Warner shares.

Liberty spokesman John Orr said there was no intention to join Icahn’s efforts to take over Time Warner.

“We just decided that we’ve got the shares, we might as well have the votes that go along with them, given that we no longer own domestic cable,” Orr said.

Time Warner spokeswoman Kathy McKiernan declined to comment on Malone’s efforts.

The move is reminiscent of an earlier one by Malone — buying an 18% voting stake in News Corp., second only to the Murdoch family’s 29.5% interest, in late 2004. Malone’s moves forced News Corp. to initiate a “poison pill” shareholders’ rights program that would make it prohibitively expensive to acquire more than a 15% voting stake in News Corp.

Time Warner’s settlement with Icahn was largely seen as a coup for Parsons, who, according to one analyst, only had to make one concession — the increased share buyback. Time Warner had originally earmarked $5 billion in share buybacks, boosting that to $12.5 billion after Icahn launched his proxy battle in August.