preview

America 's Largest Internet Service Provider

Better Essays

Situation Overview

Between January 1998 and January 2000 Time Warner’s stock saw a 1300% increase as it grew to become the second largest cable provider in the United States. Time Warner had grown into a major player in the media industry through a number of high profile mergers and acquisitions. In 1998 Time Inc. and Warmer Brothers merged in a deal where Time bought Warner Brothers for $14.9 billion. Gerald Levin, who had been CEO of Time Warner since December 1992, had done an excellent job in the eyes of the shareholders. Despite his remarkable success in his first eight years as CEO, CNBC named Levin as one of the “Worst American CEOs of All Time.” Levin was able to earn this distinction primarily in his leadership role in the …show more content…

Case felt that the vertical integration of the two companies would promote synergy. They believed Time Warner could gain from AOL’s experience and brand recognition in the new Internet industry while AOL would benefit from Time Warner’s cable infrastructure. The two CEOs noted that both companies had comparable values that would mesh well together. Both sides had been interested in merging with another large company in a related industry. AOL “had been plotting for months about how to use its high-priced stock to make a big acquisition. The company hired the investment bank Salomon Smith Barney… to consider various targets.” AOL was in talks with eBay and Electronic Arts while Time Warner was discussing a merger with Yahoo. Levin and Time Warner felt that they had transform their company in order to be competitive in the fast paced Internet age. AOL feared that if they did not move quickly to offer high-speed cable Internet their market share would vanish.
The two CEOs moved quickly and privately. After a few dinner meetings with Case, Levin discussed the deal with Richard Parsons, Time Warner’s president—he thought it was a good idea. Levin only discussed the deal with a few top executives and a deal was made in early January 2000. The deal was announced publically on January 10, 2000 and at a value of $350 billion, it was the largest merger

Get Access