Time Warner, AOL to Merge;
Deal Creates a Multimedia Giant
By PETER GUMBEL
Staff Reporter of THE WALL STREET JOURNAL
LOS ANGELES -- Media and entertainment giant Time Warner Inc. and
the world's biggest online-service provider America Online Inc. announced
a blockbuster merger early Monday the companies valued at $350 billion.
The two firms said the merged entity will be renamed AOL Time Warner
Inc. Under terms of the deal, Time Warner shareholders will receive 1.5
shares of AOL Time Warner for each share they own. AOL shareholders
will receive one share of the new entity for each share they own.
When complete, America Online's shareholders will own approximately
55% of the combined firm and Time Warner's shareholders will own
approximately 45%. The stock will be traded under the symbol AOL on
the New York Stock Exchange, the companies said.
America Online Chairman and Chief
Executive, Steve Case, will be named
chairman of the merged company, while Time
Warner's Chairman and Chief Executive
Gerald Levin will be chief executive. Ted
Turner, currently vice chairman of Time
Warner, will continue in that capacity at the
merged firm.
The companies said Mr. Turner has agreed to
vote his Time Warner shares, representing
approximately 9% of the company's
outstanding common stock, in favor of the
merger.
AOL, which has more than 19 million
subscribers, has a current market capitalization
of about $164 billion, while Time Warner has
a market capitalization of $83 billion.
By uniting a major media conglomerate with a leading Internet company,
the transaction is likely to have major repercussions on both industries. It
comes at a time when many big media companies are struggling to figure
out how to harness the power of the Internet, and when Internet
companies are increasingly looking to put entertainment and other content
on their Web sites to attract more customers.
Meanwhile, Time Warner has been trying to build Internet "hubs" that
focus on entertainment and news and created a high-speed Internet service
called Road Runner.
AOL has been sparring recently with Time Warner over the issue of
cable-TV companies allowing access to their high-speed lines into
consumers' homes to Internet service providers.
Time Warner's businesses include Time magazine, Warner Bros. studio,
Warner Music Group, the HBO cable channel, Time Warner Cable, Time
Warner Telecom, Warner Books and the WB television network.
Time Warner's businesses include Time magazine, Warner Bros. studio,
Warner Music Group, the HBO cable channel, Time Warner Cable, Time
Warner Telecom, Warner Books and the WB television network.
Active Dealmakers
Both companies also have been busy with various deals recently.
Time Warner reportedly is interested in buying General Electric Corp.'s
NBC television network for $25 billion. General Electric and Time Warner
denied they have talked.
Last month in its latest move to expand investments in new media, Time
Warner said it established a $500 million fund for digital-media
investments, with half of the fund made up of cash and the other half in
promotional time on Time Warner's media outlets. The fund will focus
Time Warner's investment efforts through the Time Warner Digital Media
unit established last year.
Late last year, AOL agreed to acquire digital-map company
MapQuest.com Inc. for about $1.1 billion in stock.
AOL executives said the Mapquest.com acquisition will bolster its efforts
to provide information access from cellular phones, handheld computers
and a variety of emerging personal devices.
AOL, meanwhile, has undertaken a broad campaign dubbed "AOL
Anywhere" to extend elements of its flagship service beyond the confines
of personal computers. MapQuest will fit neatly into this strategy, since it
has partnerships with Nokia Corp. and Sprint Corp. to deliver travel
directions to users of Internet-enabled phones. MapQuest is also
developing a service that uses telephones to verbally dictate-driving
instructions to users. Now AOL will be part of those ventures. |
