SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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America Online's common stock between the time of the execution of the merger
agreement and the time of the completion of the merger. The Time Warner board
of directors also considered the fact that the merger agreement does not
contain any provisions that limit the effect of declines in the market price of
common stock of America Online prior to the completion of the merger on the
value of the consideration to be received by holders of common stock of Time
Warner in the merger. The Time Warner board of directors considered the absence
of these provisions to be acceptable in the context of a "merger of equals" in
which each of America Online and Time Warner will have the right to designate
half of the directors of AOL Time Warner to serve for the first year after the
merger is completed and the senior management of AOL Time Warner will be
comprised of executive officers of both Time Warner and America Online and
noted that, while the absence of these provisions exposes Time Warner
stockholders to some market risk, the risk is mitigated by several factors.
Holders of Time Warner's common stock will participate in any appreciation in
the value of America Online's common stock between the time of the execution of
the merger agreement and the time of the completion of the merger. In addition,
any protection against declines in the market price of America Online's common
stock would likely be coupled with a cap on the benefit Time Warner's
stockholders would enjoy as a result of increases in the market price of
America Online's common stock.     
   
   Continuing Equity Interest of Time Warner Stockholders in AOL Time
Warner. The board of directors of Time Warner considered the fact that, by
providing for the exchange of shares of common stock of Time Warner for shares
of common stock of AOL Time Warner, the merger agreement provides for holders
of Time Warner's common stock to participate in the value that may be generated
by the combination of Time Warner and America Online through their continued
equity participation in AOL Time Warner, while realizing through the exchange
of shares a premium for their Time Warner shares, based on stock market prices
at the time of execution of the merger agreement, and while obtaining tax-free
treatment. The Time Warner board of directors also noted that the proposed
ratio of exchanging shares of Time Warner common stock for shares of AOL Time
Warner common stock would result in holders of Time Warner's common stock
receiving a significant equity stake in AOL Time Warner, equal to approximately
45% of the common stock of AOL Time Warner after completion of the merger on a
fully diluted basis.     
 
   Corporate Governance Arrangements. The board of directors of Time Warner
noted that the merger agreement is structured as a "merger of equals" and
provides that the board of directors of AOL Time Warner will initially consist
of sixteen individuals, eight of whom will be designated by America Online and
eight of whom will be designated by Time Warner. In addition, the Time Warner
board of directors noted that the merger agreement provides that Stephen M.
Case, the Chairman of the Board and Chief Executive Officer of America Online,
will initially serve as Chairman of the Board of AOL Time Warner, and Gerald M.
Levin, the Chairman and Chief Executive Officer of Time Warner will initially
serve as Chief Executive Officer of AOL Time Warner. The Time Warner board of
directors also noted that the affirmative vote of 75% of the members of the
board of directors of AOL Time Warner will be required to change the size of
the board of directors and that, until December 31, 2003, the affirmative vote
of 75% of the members of the board of directors of AOL Time Warner will be
required to remove the chairman or chief executive officer. The Time Warner
board of directors concluded that these arrangements would reasonably assure
the continuity of the management of AOL Time Warner following completion of the
merger and allow a strong management team drawn from both Time Warner and
America Online to work together to integrate the two companies.
 
   Alternatives to the Merger. The board of directors of Time Warner considered
information presented by senior members of Time Warner's management team that,
in seeking a digital transformation of Time Warner, they had explored
alternatives to the proposed combination of Time Warner and America Online,
including the internal development of an Internet distribution infrastructure
and growth through acquisitions. The Time Warner board of directors also
considered the view of senior members of Time Warner's management team that the
combination of Time Warner with America Online provides Time Warner with an
extensive Internet distribution infrastructure in a relatively brief period of
time and cost-effective manner. In addition, the Time Warner board of directors
considered management's view that the combination of Time Warner and America
Online accelerates Time Warner's Internet distribution plan by several years
and provides significant cost savings with greater distribution capabilities,
opportunities for cross-marketing products and potential to offer consumers new
and innovative products than would other potential avenues for exploiting the
potential of the Internet.
 
 
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