In addition to the other information contained in or incorporated by
reference into this joint proxy statement-prospectus, you should carefully
consider the following risk factors in deciding whether to vote for adoption of
the merger agreement.
The value of the shares of AOL Time Warner stock that you receive may be less
than the value of your shares of America Online stock or Time Warner stock.
Upon completion of the merger, all shares of America Online common stock and
Time Warner common stock will be converted into shares of AOL Time Warner
common stock. Similarly, all shares of Time Warner LMCN-V series common stock
will be converted into shares of LMCN-V series common stock of AOL Time Warner
and all shares of Time Warner preferred stock will be converted into shares of
a corresponding series of AOL Time Warner preferred stock. The ratios on which
the shares will be converted are fixed, and there will be no adjustment for
changes in the market price of either America Online common stock or Time
Warner common stock. Neither party is permitted to "walk away" from the merger
or resolicit the vote of its stockholders solely because of changes in the
market price of either party's common stock. America Online common stock has
historically experienced significant volatility. Stock price changes may result
from a variety of factors that are beyond the control of America Online and
Time Warner, including changes in their businesses, operations and prospects,
regulatory considerations and general market and economic conditions.
The market value of the shares of AOL Time Warner stock that will be
received in exchange for shares of America Online common stock and shares of
Time Warner stock in the merger will not be known at the time stockholders of
America Online and stockholders of Time Warner vote on the adoption of the
merger agreement, because the shares of AOL Time Warner common stock will not
trade publicly until the completion of the merger. Shares of America Online
common stock and shares of Time Warner common stock may have a greater market
value than the shares of AOL Time Warner common stock for which they are
The combination of America Online and Time Warner to form an integrated media
and communications company creates a new business model that the marketplace
may have difficulty valuing.
The market value of shares of common stock generally reflects a "multiple"
of selected measures of financial performance, such as operating profits or
earnings per share. The market price of shares of common stock of Internet
companies, such as America Online, typically reflects a higher multiple of the
underlying measures of financial performance than does the market price of
shares of common stock of media companies, such as Time Warner. The multiple
for shares of AOL Time Warner common stock may be similar to the multiple for
shares of America Online common stock, or it may be similar to the multiple for
shares of Time Warner common stock, or it may reflect a "blending" of the two.
AOL Time Warner will be the first global, fully integrated media and
communications company, and financial analysts and investors may have
difficulty identifying and applying measures of financial performance that
reflect the value of the combined company. As a result, shares of AOL Time
Warner common stock may not achieve a valuation in the public trading market
that fully reflects the true value of the combined company, including its
synergies and benefits.
AOL Time Warner may fail to realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on the ability of AOL Time
Warner to realize the anticipated growth opportunities and synergies from
combining the businesses of America Online with the businesses of Time Warner.
To realize the anticipated benefits of this combination, members of the
management team of AOL Time Warner must develop strategies and implement a
business plan that will:
. effectively combine Time Warner's media, entertainment and news brands
and its broadband delivery systems with America Online's interactive
services, technology and infrastructure;