Time Warner Case Study

INTRODUCTION

The end of twentieth century saw the internet revolution with large number of IT and internet based firms coming into picture. Internet based start-ups made billions of money riding high on the dotcom boom. All the companies wanted to start its stores and operations online so as to cater to the growing number of online users. AOL was one such company that grew at a fast rate selling internet based services and products.

AOL’s acquisition of Time Warner in 2000-2001 is considered as one of the biggest M&A deals in the corporate history. It was considered by many analysts to be a great move and a non-formidable knot. But the marriage could not last longer. It went pushing down the drain billions of shareholders money.

American Online is identified as the world 's largest Internet access provider with approximately 12 million subscribers in the United States and several million in Europe. It is recognised as a leading global web services company it owns one of the largest advertising networks in the United States.

The AOL proprietary network offers a wide range of content services including online shopping and communication tools. It has existing portals in Germany, Canada, France and the United Kingdom as well as in other parts of Europe and Asia.

TIME WARNER (now TIME WARNER INCORPORATION)

Time Warner was an American media company that specializes in digital media, publishing, filmed entertainment, cable networks, cable and music. It also provided cable television services and pre-recorded compact laser discs. Major revenue generator for Time Warner was its magazine publishing and sheet music publishing, well known music licensing to radio stations, motion picture production and distribution services. Its corporate headquarters is located in New York City.

Time Warner Inc is one of the world 's leading media and entertainment Company that offers cable systems, television networks, filmed entertainment, publishing services and interactive services.

These services are offered under the following brands:

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On 10 January 2000, American Online announces that it has agreed to acquire Time Warner in a deal said to be the largest in history. The terms of the deal included AOL shareholders to receive 1 share in AOL Time Warner for each AOL share that they tender and Time Warner shareholders will receive 1.5 shares in AOL Time Warner for each Time Warner share that they tender. Which was based on AOL 's closing price of USD 73.00 on 7 January 2000 and the offer values each Time Warner share at USD 109.5. Premium of 69.1 per cent over Time Warner 's closing price on 7th January, 2000 of USD 64.75.

With the assumption of USD 17.2 billion of Time Warner debt and the offer values Time Warner 's equity at USD 164.75 billion and which results in a total consideration of around USD 182 billion.

The Merger was structured as a stock-for-stock exchange. AOL and Time Warner formed a new holding company called AOL Time Warner and the new holding company formed two wholly owned subsidiaries. One subsidiary merged with and into AOL and other subsidiary merged with and into Time Warner. Hence AOL and Time Warner each became a wholly owned subsidiary of AOL Time