American Express Co., which blew its first attempt to diversity into the communications business early this year by miscalculating the resistance it would face from McGraw-Hill Inc., didn't want to lose the opportunity to buy half of Warner Communications Inc.'s cable television subsidiary.
But the merger proposal got all the way to the Federal Communications Commission, where it was turned down last week because it would violate an FCC rule prohibiting cable TV companies and normal TV stations in the same market from having common directors.
This morning, American Express announced that former Pennsylvania governor William Scranton, who sits on the board of the New York Times Co., and Henry Henley, a member of the board of General Electric Co., had resigned from the board of American Express.
In making its ruling last week, the FCC said that it might approve the merger if either Henley and Scranton resigned or if Warner Cable Corp. sold off the 10 systems where the overlap occurred.
"It's incredible that the merger proposal got this far before American Express got its house in order," said one insider. "Just as in the McGraw-Hill case, they didn't seem to go in totally prepared."
Last September, American Express and Warner announced that Warner would sell half its interest in the cable subsidiary for $175 million in short-term notes and cash.
"Why the directors, when we could have sold the offending systems?" one American Express insider asked. "Simple economics, I guess."