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 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.
Based on AOL's composite closing
price of $73.75 on the New York Stock
Exchange Friday, and based on the
terms of the merger, the all-stock
combination is valued at $350 billion.
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.
Marketing Alliances to Be Expanded
Separate from the merger transaction, America Online and Time
Warner also announced new marketing, commerce, content and
promotional agreements that will immediately expand various
relationships already in place between the two companies. Some
of the agreements include:
The AOL service will feature Time Warner's InStyle
magazine, expanding on the content Time Warner already
offers AOL members from other magazines.
CNN.com and Entertaindom.com programming will be
featured prominently on various America Online services.
AOL members will have access to a wide range of Time
Warner promotional music clips from Time Warner artists.
Time Warner and AOL MovieFone will participate in
online-offline cross-promotion of Time Warner movies and
related content, including live events.
Broadband CNN news content will be distributed on AOL
Plus, the rich media content offering designed for AOL
members connecting via broadband, when it launches this
spring. |
