AOL and Time Warner to Merge in Biggest Merger Ever

America Online (http://www.aol.com) and Time Warner ( http://www.timewarner.com) announced today that they will merge, in the largest merger in corporate history valued at around $165 billion. This creates a huge new media and entertainment company with a combined market value of $350 billion.

The new company will be called AOL Time Warner Inc. and will have combined revenues of over $30 billion. Gerald Levin, Time Warner's Chairman and CEO, who will become AOL Time Warner's CEO. AOL's CEO Steve Case will become Chairman of the new company. In other high profile management changes, Ted Turner will become Vice Chairman and AOL President and COO Bob Pittman will be co-Chief Operating Officers.

"This is an historic moment in which new media has truly come of age," said Steve Case. "We're kicking off the new century with a unique new company that has unparalleled assets and the ability to have a profoundly positive impact on society. By joining forces with Time Warner, we will fundamentally change the way people get information, communicate with others, buy products and are entertained - providing far-reaching benefits to our customers and shareholders."

"The opportunities are limitless for everyone connected to AOL Time Warner - shareholders, consumers, advertisers, the creative and talented people who drive our success, and the global audiences we serve," said Gerald Levin.

What this means to the Internet space is that AOL Time Warner instantly become the largest and most visited site, by passing Yahoo!. Although AOL's has a large Internet presence, Time Warner struggled early on when it launched its Pathfinder site merging all its properties into one site. With Time Warner's huge news and entertainment properties with its broadband distribution platform and AOL's family of properties, the new AOL Time Warner sets a new standard for media/Internet companies.

AOL Time Warner's brands will include AOL, Time, CNN, CompuServe, Warner Bros., Netscape, Sports Illustrated, People, HBO, ICQ, AOL Instant Messenger, AOL MovieFone, TBS, TNT, Cartoon Network, Digital City, Warner Music Group, Spinner, Winamp, Fortune, AOL.COM, Entertainment Weekly, and Looney Tunes.

The deal began in November when Steve Case approached Gerald Levin about a merger, where Case would take the Chairman seat. From there, things went quickly--and quietly. There were no leaks. The announcement took everyone by surprise.

What it means for AOL's streaming properties, Spinner.com and WinAmp, weren't made clear but it opens them up into a brand new market. America Online has more than 20 million members with CompuServe, ICQ and AIM adding raising the total users/registrants to over 120 million. One thing to be sure of is that there will be lots of cross promotion and no shortage of content. AOL will highlight Warner Music Group artists on its services as well as Time Warner's CNN.com and Entertaindom.com. It will also provide programming on its Road Runner cable service, as well as AOL's Plus service this spring.

With this deal many people wondered whether AOL Time Warner will allow other content on its Road Runner broadband service. According the companies, they "will be committed to ensuring consumer choice of ISPs and content" and hope that the merger will "persuade all companies operating broadband platforms to provide consumers with real choice."

The merger also has started rumors of other technology/media mergers. First in line are Yahoo! which has a market capitalization larger than most media companies and has yet to link itself to a media conglomerate. Also CBS/Viacom, which previously had the largest merger, has been named as ready for more growth.

Time Warner and America Online stock will be converted to AOL Time Warner stock at fixed exchange ratios. Time Warner shareholders will receive 1.5 shares of AOL Time Warner for each share of Time Warner stock they own. America Online shareholders will receive one share of AOL Time Warner stock for each share of America Online stock they own.

When complete, America Online's shareholders will own approximately 55% and Time Warner's shareholders will own approximately 45% of the new company. The stock will be traded under the symbol AOL on the New York Stock Exchange.

The merger is expected to close by the end of the year.

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