UR TV CAST

Henry McLeish, shadow transport minister, said: “Rail privatisation has gone from being a bad idea that will damage the interests of those who use British Rail, to a disastrous idea that will damage the interests of every taxpayer.”Mr McLeish said in a statement: “It is appalling that any company should be allowed to milk the tax system in this way. Naturally we are bound to consider anything that would be of benefit to our shareholders and this scheme is a perfectly normal form of tax-planning.”However, the mere consideration of such a scheme has infuriated the Labour Party, staunch opponents of the privatisation. One source close to Eurotunnel said: “We are considering a scheme that has been put to us from KPMG. Eurotunnel would receive a cash sum for bringing this benefit to its partners.The finer details of the scheme are unclear and yesterday neither KPMG nor the company would discuss the proposals. DAVID HELLIER

The Labour Party demanded a statement from the Government yesterday after learning that Eurotunnel, the cash-stricken operator of the Channel tunnel, is considering taking part in bids for the profitable rolling- stock companies as a way of improving its financial health.
The move followed news that KPMG, Eurotunnel’s auditors, had approached bidders with a tax scheme that would involve Eurotunnel joining one or more of the consortiums, and passing on its tax losses to the other partners.The consortiums could bring some of Eurotunnel’s tax losses forward, enabling the groups to pay less tax in the early years.

Rupert Murdoch’s News Corporation had also held talks with TBS and TCI.Mr Murdoch was believed to be interested in the synergies between CNN and Sky News, his 40 per cent owned 24 hour satellite news service based in the UK.Mr Levin reportedly would attempt to finance the takeover by issuing fresh stock, rather than adding to Time Warner’s debt load of $15bn.While this would threaten to weaken the price of Time Warner stock, company executives are apparently confident that such a dilution would be offset by the prospect of additional earnings from the Turner assets.Comment, page 17How the two organisations line upTurner Broadcasting SystemRevenues (1994) $2.8bnPre-tax profits (1994) $346.9mBroadcastingWTBS AtlantaCNNThe Turner NetworkThe Cartoon NetworkTurner Classic MoviesFilm ProductionTurner PicturesReal Line CinemaCastle Rock EntertainmentTime WarnerRevenues (1994) $15.9bnProfits (1994) $2.9bnMagazinesTimeSports IllustratedPeopleFortuneBook PublishingWarner BooksLittle, BrownFilm, TV ProductionWarner BrosMusicWarner/ChapellElektraAtlanticAlso cable network in the US. “Anything can happen,” the insider said.He added, however, that any bid might face regulatory hurdles, particularly in light of intense merger activity recently.Mr Turner had apparently sought financing support from Microsoft, the software development company run by Bill Gates, and the French media company, Havas, in order to build a war chest to bid for CBS. Time Warner had been one of the chief stumbling blocks to a plan by Mr Turner to counter bid for CBS, the US network that is on the receiving end of a $5.4bn agreed offer from Westinghouse.A TBS insider said Time Warner’s opposition to the CBS buyout plan had “softened” but it was unclear whether a merger of Time Warner and TBS would end any attempt to counter bid. Despite stumbling badly in 1986, after the acquisition of MGM, Mr Turner has built a highly profitable empire.For Mr Turner the deal would mean a humbling of his ambitions as in recent months he has been seeking finance to launch a bid for his own broadcast network. Mr Turner has a reputation for changing his mind, however.Some analysts speculated that Mr Turner would find it difficult to work under Mr Levin after 15 years at the helm. Mr Turner was said by friends to be “enthusiastic” about the merger, which was proposed to him directly on 19 August at his Montana ranch by Gerald Levin, the chief executive of Time Warner.

The combined operations would include four Hollywood film production companies – Warner Bros, Turner Pictures, New Line Cinema and Castle Rock Entertainment. Turner shares rose $6 to $30 in early trading in New York, on news that the negotiations were under way. “This would be a rich deal”, John Reidy, a media industry analyst at Smith Barney, said, noting that the offer values TBS at roughly 16 times projected 1996 earnings.Other analysts said the deal made sense, given how well the assets of the two companies would fit together. A substantially larger presence in filmed entertainment was one clear advantage to Time Warner.Mr Turner is believed to have been offered the position of vice-president, in charge of entertainment. At just over $41 per Time Warner share, the deal would be worth more than $8bn. The company also owns the Cartoon Channel, Turner Entertainment and a “super station” in Atlanta, Georgia.The companies refused to confirm details, despite extensive speculation. In a terse statement they said: “Significant issues remain to be negotiated and there can be no assurance that agreement will be reached or a transaction consummated.”Among many unknown factors is the attitude of John Malone, the chief executive of Tele-Communications Inc, TCI, the cable systems company that has a 21 per cent shareholding in Turner Systems.According to analysts in New York Time Warner is offering between 0.7 and 0.8 shares for each share in TBS, for the 81 per cent of TBS it does not own.