SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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                                    ANNEX E
 
SALOMON SMITH BARNEY
A member of citigroup [LOGO]
 
January 9, 2000
 
Board of Directors
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
 
Members of the Board:
 
   You have requested our opinion as to the fairness, from a financial point of
view, to America Online, Inc. ("AOL"), of the Exchange Ratio (as defined below)
contemplated by the Agreement and Plan of Merger (the "Merger Agreement") to be
entered into between AOL and Time Warner Inc. ("Time Warner"), pursuant to
which, among other things, a new holding company ("Holdco") and two subsidiary
companies of Holdco ("AOL Merger Sub" and "Time Warner Merger Sub",
respectively) will be organized under the laws of the State of Delaware in
order to effect a business combination of AOL and Time Warner. The Merger
Agreement provides, among other things, that AOL Merger Sub will be merged with
and into AOL (the "AOL Merger"), with AOL continuing as the surviving
corporation, and Time Warner Merger Sub will be merged with and into Time
Warner (the "Time Warner Merger" and, together with the AOL Merger, the
"Mergers"), with Time Warner continuing as the surviving corporation. The
Merger Agreement provides, among other things, that (i) in the AOL Merger, each
outstanding share (other than such shares owned or held by AOL which will be
cancelled) of common stock, par value $.01 per share, of AOL (the "AOL Common
Stock"), together with the associated right to purchase Series A-1 Junior
Participating Preferred Stock of AOL, will be converted into the right to
receive one share of common stock, par value $.01 per share, of Holdco (the
"Holdco Common Stock"), and (ii) in the Time Warner Merger, each outstanding
share (other than such shares owned or held by Time Warner which will be
cancelled) of common stock, par value $.01 per share, of Time Warner (the "Time
Warner Common Stock"), together with the associated right to purchase Series A
Participating Cumulative Preferred Stock of Time Warner, will be converted into
the right to receive 1.5 shares of Holdco Common Stock (the "Exchange Ratio").
 
   In arriving at our opinion, we reviewed the draft dated January 9, 2000 of
the Merger Agreement and held discussions with certain senior officers and
other representatives and advisors of AOL and certain senior officers and other
representatives and advisors of Time Warner concerning the business, operations
and prospects of AOL and Time Warner. We examined certain publicly available
business and financial information relating to AOL and Time Warner as well as
certain estimates and other data for AOL and Time Warner prepared by our and
Morgan Stanley & Co. Incorporated's research analysts. In addition, we examined
certain information relating to certain of the strategic implications and
operational benefits anticipated from the Mergers. We also evaluated the
potential pro forma financial impact of the Mergers on AOL. In addition to the
foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
 
   In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with us. We relied on estimates prepared by our research analysts,
based on our own independent evaluation of this information and indications by
the management of AOL that the estimates regarding AOL were reasonably
consistent with their own and indications by the management of Time Warner that
estimates regarding Time Warner prepared by Morgan Stanley & Co. Incorporated's
research analysts were reasonably consistent with their own. We determined that
our research analysts' estimates regarding Time
 
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