WB Founders’ Stake Bought by AOL

AOL Time Warner has agreed to pay Jamie Kellner and eight other founding executives of the WB television network nearly $110 million in January for their 11% stake, setting the total value of the 7-year-old network at about $1 billion, according to several people with knowledge of the deal.

AOL Time Warner said the agreement was negotiated in the spring of 2001 as part of Kellner’s promotion to his current job as chief executive of Turner Broadcasting System Inc. The buyout was designed to prevent Kellner, who founded the WB in 1995 with Time Warner as a majority partner, from any conflicts of interest that could arise from his expanded role over the WB, as well as cable channels including CNN, TBS, TNT, and the Cartoon Network.

AOL Time Warner management feared that without a buyout agreement at a set price, Kellner would have a financial incentive to funnel the best programming to the WB rather than one of the other networks he was adding to his portfolio.

The agreement, buried in a phrase in AOL Time Warner’s 2001 annual report, will increase AOL Time Warner’s stake in the WB to 77.5%, from the current 66.5%. Tribune Co., owner of the Los Angeles Times, owns the remaining 22.5% of the WB.

The little-noticed disclosure was first reported on Tuesday by the New York Post.

However, many at AOL Time Warner have been well-aware of the plan. In anticipation of the buyout, Kellner and Garth Ancier, a WB executive, distributed bonus checks to some 250 WB employees at last year’s network Christmas party at a Los Angeles night club.

Neither AOL Time Warner nor Tribune would comment on the buyout price.

Despite speculation for months that Kellner was eager to return to Los Angeles from Turner Broadcasting’s Atlanta-based headquarters, company officials reiterated that he intends to fulfill his contract, which expires in 2004.

Yet Turner Broadcasting executives say the huge payout could create tensions within the Atlanta offices, especially at a time when AOL Time Warner is struggling financially and accounting practices at its America Online unit are under investigation.

The WB is having its best season yet, with ratings up 25% among viewers 18 to 34 years old, even as viewership among the major networks is flat.