SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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   Morgan Stanley noted that the exchange ratio pursuant to the merger
agreement implied a value of $110.625 for the common stock of Time Warner
resulting from the merger, based on the trading price of the America Online
common stock on January 7, 2000.
 
   Historical Exchange Ratio Analysis.  Morgan Stanley reviewed the implied
historical exchange ratios for the shares of common stock of each of Time
Warner and America Online determined by dividing the price per share of Time
Warner common stock by the price per share of America Online common stock over
the three-year period from January 7, 1997 through January 7, 2000, and over
the twelve-month period from January 7, 1999 through January 7, 2000. Morgan
Stanley performed this analysis to compare the premium represented by the
exchange ratio in the merger with the premium/(discount) represented by
historical exchange ratios prevailing in the open market.
 
   This analysis indicated the following premiums/(discounts) represented by
the average historical exchange ratios prevailing in the open market:
 

<TABLE>
<CAPTION>
                                                           Premium/(Discount)
   Period Ending                                         Over Average Historical
   January 7, 2000                                           Exchange Ratio
   ---------------                                       -----------------------
   <S>                                                   <C>
   Last one month.......................................            81 %
   Last three months....................................            66 %
   Last six months......................................            34 %
   Last one year........................................            25 %
   Last 18 months.......................................           (16)%
   Last two years.......................................           (37)%
   Last three years.....................................           (61)%
</TABLE>

 
   Morgan Stanley noted that the 1.5x exchange ratio in the merger agreement
implied a 71% premium to the market ratio implied by the trading prices of the
America Online and Time Warner common stock on January 7, 2000.
 
   Relative Contribution Analysis.  Morgan Stanley compared pro forma
contribution of each of Time Warner and America Online, based on publicly
available Morgan Stanley research estimates, to the resultant combined company
assuming completion of the merger. Morgan Stanley adjusted these statistics to
reflect each company's respective capital structures and then compared them to
the pro forma ownership by Time Warner stockholders of the common stock of the
combined company of approximately 45%, implied by the exchange ratio.
 
   This analysis indicated the following equity contribution for Time Warner to
the combined company on a pro forma basis:

<TABLE>
<CAPTION>
                                                                Time Warner
                                                            Equity Contribution
                                                            -------------------
   <S>                                                      <C>
   Estimated Net Revenues:
     2000.................................................           79%
     2001.................................................           77%
   Estimated EBITDA:
     2000.................................................           79%
     2001.................................................           74%
   Estimated Net income (after preferred dividends):
     2000.................................................           46%
     2001.................................................           48%
   Market equity value (based on 1/7/00 closing prices and
    fully diluted shares using treasury method)...........           32%
</TABLE>

 
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