SEC Filings

425
TIME WARNER INC. filed this Form 425 on 02/25/2000
Entire Document
 


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Type:  425
Sequence:  1
Description:  Rule 425 Communications



                    Filed by AOL Time Warner Inc.
                    Pursuant to Rule 425 under the Securities Act of 1933
                    Commission File Number 333-30184
                    Subject Company:  AOL Time Warner Inc.



     The following communications include certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations and are
naturally subject to uncertainty and changes in circumstances.  Actual results
may vary materially from the expectations contained herein.  The forward-looking
statements herein include statements about the proposed Time Warner Inc./America
Online, Inc. merger.  The following factors, among others, could cause actual
results to differ materially from those described herein:  failure of the Time
Warner or America Online stockholders to approve the merger; the risk that the
Time Warner and America Online businesses will not be integrated successfully;
the costs related to the merger; inability to obtain, or meet conditions imposed
for, governmental approvals for the merger; and other economic, business,
competitive and/or regulatory factors affecting America Online's and Time
Warner's businesses generally.  More detailed information about those factors is
set forth in filings by AOL Time Warner Inc., America Online and Time Warner
with the Securities and Exchange Commission, including the most recent quarterly
report on Form 10-Q and current reports on Form 8-K.  None of AOL Time Warner,
America Online or Time Warner is under any obligation to (and expressly
disclaims any such obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.

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Set forth below are selected "talking points" that may be used from time to time
        by representatives of America Online, Inc. and Time Warner Inc.
      in discussing the proposed merger of America Online and Time Warner
                 and the combined company, AOL Time Warner Inc.


Q.   What will the combined company be called?

A.   AOL Time Warner Inc.

Q.   Where will the company be headquartered?

A.   AOL Time Warner's corporate headquarters and principal executive offices
     will be in New York City, with additional executive offices in Dulles,
     Virginia.

Q.   Where will the new company's stock be listed for trading?

A.   The common stock will be listed for trading on The New York Stock Exchange
     under the symbol AOL.

Q.   What are some of the strategic advantages that America Online expects to
     gain from the merger with Time Warner?

A.   By combining the leading interactive services and media companies, AOL Time
     Warner will advance the strategic goals of America Online and Time Warner
     and will provide the potential for stronger operating and financial results
     than either company could achieve on its own.  America Online's Internet
     resources will drive the digital transformation of Time Warner's divisions,
     and Time Warner's resources will advance the development of next-generation
     broadband AOL Anywhere services, as well as build subscription and
     advertising and e-commerce growth throughout America Online's brands and
     products.  With leading global brands, cost-efficient infrastructure,
     technological expertise and a shared vision for the Internet age, the two
     companies' complementary assets will act as catalysts to accelerate the
     growth of both subscription and advertising/e-commerce revenues, while also
     creating whole new business opportunities.

     America Online's success has been guided by the principle that mass market
     consumers seek convenience, ease-of-use and trusted brands in their
     Internet experience.  AOL Time Warner will have an unmatched ability to
     provide these through a full range of interactive services delivered across
     current and emerging platforms.  The combined company will be able to lead
     the next wave of Internet growth as 

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     interactivity extends beyond the personal computer to the television,
     wireless telephone and personal organizers, as well as other Internet-
     enabled devices--allowing consumers to access the Internet from anywhere
     and at any time, and making the interactive experience even more convenient
     and valuable to them.

Q.   How will the merger affect America Online's multiple brand-strategy?

A.   America Online believes that combining with Time Warner will dramatically
     advance America Online's multiple-brand strategy.  Time Warner's leading
     global consumer brands cover the full spectrum of media entertainment and
     information--reaching from broadcast and cable television to film, music,
     publishing and the Internet.  Together with America Online's family of
     premier interactive brands, the combined company will have a valuable
     portfolio of brands to deliver to consumers over multiple platforms.

Q.   How will the merger affect America Online's multiple revenue stream
     strategy?

A.   America Online believes the merger will advance America Online's strategy
     of multiple revenue streams by combining with Time Warner, which has grown
     its revenues across three major areas that reinforce America Online's:
     subscriptions, advertising and e-commerce and content.  Putting together
     Time Warner's content properties with America Online's Internet and e-
     commerce infrastructure, AOL Time Warner will be able to create and
     distribute e-commerce products and services based on film, cable,
     broadcast, music, publishing and media properties.  Recent successful
     collaborations to promote "Austin Powers:  The Spy Who Shagged Me" with AOL
     MovieFone and on "You've Got Mail" with Warner Bros. are small examples of
     what can be achieved in cross-promotion. The merger will expand the
     opportunities for advertising across platforms and brands, including
     interactive properties, publishing, cable and broadcast television.

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Q.   How will the merger affect America Online's AOL Anywhere strategy?

A.   America Online believes that combining with Time Warner will advance
     America Online's utilization of technology to extend and enhance its AOL
     Anywhere strategy to expand Internet communication, interactivity and
     convenience to devices beyond the personal computer.  Time Warner's cable
     systems will expand the broadband delivery systems for America Online's
     interactive services and act as a catalyst for the development of AOL Plus-
     -America Online's next generation multi-media/interactive services--to
     personal computers.  The combination will also further America Online's AOL
     Anywhere strategy of extending its interactive brands with their hallmark
     convenience and ease-of-use to new devices through television, wireless
     telephone and personal organizers as well as other companion devices.  The
     merger will also provide a communications platform that gives AOL Time
     Warner the capability to offer messaging products and local telephony over
     cable systems.

Q.   What are some of the operating synergies and new business opportunities
     that America Online believes will benefit AOL Time Warner?

A.   America Online believes that the combined company will benefit from
     substantial operating synergies as well as major new business
     opportunities.  The following are representative potential cost synergies
     and revenue growth opportunities from the combination with Time Warner:

        . revenue opportunities and synergies in areas such as advertising by
          providing companies "one stop" shopping for their online as well as
          print and broadcast media advertising campaigns;

        . increased subscriber growth through cross promotion and marketing
          opportunities between Time Warner's brands and content and America
          Online's brands and interactive services;

        . efficiency in marketing across different platforms and distribution
          systems, including cable, publishing and interactive services;

        . cost synergies in areas such as technology and network
          infrastructure, direct mail and interactive marketing, use of
          "evergreen" billing systems, sales forces and other corporate
          services; and

        . cost efficiencies in launching and operating interactive extensions
          of Time Warner's brands.

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Q.   What are some of the strategic advantages that Time Warner expects to gain
     from the merger with America Online?

A.   The combination of Time Warner's world-class media brands, subscriber bases
     and technologically advanced broadband delivery systems with America
     Online's renowned consumer online brands, subscriber base and extensive
     Internet infrastructure and expertise will provide AOL Time Warner with
     strengths and synergies in all its businesses.  AOL Time Warner's multiple
     brands, vast array of content, extensive infrastructure and strong
     distribution capabilities will provide it with a greater capacity to
     capitalize on and propel the convergence of media, entertainment and
     communications than Time Warner (or America Online) alone.  There are also
     strategic benefits of combining Time Warner's broadband infrastructure with
     America Online's established success in managing consumer migration online.
     The strategic combination will accelerate the digital transformation of
     Time Warner by infusing all of Time Warner's businesses with a heightened
     digital focus.

Q.   What are some of the ways in which Time Warner expects the merger to
     increase the potential for growth?

A.   The combination of Time Warner and America Online is expected to strengthen
     the ability of these companies to generate growth in revenue, earnings
     before interest, taxes and amortization, or "EBITA," earnings before
     interest, taxes, depreciation and amortization, or "EBITDA," and cash flow.
     In particular:

        . America Online's extensive Internet infrastructure is expected to
          provide a new and expanding distribution medium for Time Warner's
          popular brands, thereby giving its content businesses increased access
          to the consumer; and

        . Time Warner's advanced broadband delivery systems are expected to
          provide an important distribution platform for America Online's
          interactive services, which is expected to result in incremental
          subscriber growth.

     In addition:

        . in the music business, AOL Time Warner will bring together Time
          Warner's prestigious labels and roster of established and new artists
          with America Online's established e-commerce capabilities; and

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        . in the publishing business, cross-marketing opportunities between
          Time Warner's prominent brands and America Online's interactive
          services are expected to provide new opportunities for subscriber
          growth.

     Finally, AOL Time Warner will have enhanced advertising and revenue
     potential due to its ability to offer promotional packages that include
     both traditional and online components.

Q.   How does Time Warner believe the merger will affect consumers?

A.   Time Warner believes that the combination of Time Warner and America Online
     has the potential to provide increased benefits for consumers. Through the
     combination of Time Warner's programming capabilities with America Online's
     Internet capabilities, AOL Time Warner is expected to be able to provide
     consumers with enhanced access to a broad selection of high quality content
     and interactive services.  In addition, through the cooperative efforts of
     employees with creative and journalistic talents and employees with
     technological expertise, AOL Time Warner is expected to offer new and
     innovative products and services that are particularly suited to
     interactive media.

Q.   How does Time Warner believe that the future of the Internet will be
     determined?

A.   Time Warner believes that the future of the Internet will be determined by
     companies that are able to take advantage of the distribution channels
     created by the Internet through providing compelling entertainment and
     informational content--companies like AOL Time Warner.

Q.   What impact does Time Warner expect the merger to have on its financial
     condition?

A.   The combination of Time Warner and America Online is expected to strengthen
     the financial condition of both Time Warner and America Online.

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Q.   How will the merger impact the digital transformation of Time Warner?

A.   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
     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.

Q.   What is the shared vision for AOL Time Warner?

A.   The merger of America Online and Time Warner will create the world's first
     fully integrated, Internet-powered, media and communications company.  The
     Internet is becoming a critical everyday experience in people's lives.  AOL
     Time Warner will be able to inform, entertain and connect consumers in
     multiple ways over many hours a day using its one-of-a-kind set of brands--
     in both networks and content.

Q.   How will AOL Time Warner create value for its stockholders?

A.   AOL Time Warner is expected to generate strong growth along several
     metrics.  For example, AOL Time Warner is expected to have a revenue base
     of approximately $40 billion in 2001, its first full year of operations. In
     addition, AOL Time Warner is expected to have EBITDA growth of 30%,
     resulting in approximately $11 billion of EBITDA in the first year.
     Although predictions in fast moving industries such as the ones in which
     AOL Time Warner will operate are complicated, revenues are expected to grow
     at a rate between 12% and 15%, the  EBITDA growth rate is expected to be in
     the zone of 25% after the first year and AOL Time Warner's free cash flow
     is expected to grow at a rate of approximately 50%.

     America Online and Time Warner will provide each other's missing pieces,
     reducing business risk.  America Online and Time Warner will act as
     catalysts on each other's current businesses.  For example, Time Warner
     will provide America Online with broadband capability and branded content.
     America Online will provide Time Warner with a leading Internet brand that
     has scale that is based on an economically sound subscription and
     advertising model.

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Q.   How will AOL Time Warner take advantage of opportunities in the market?

A.   The Internet is becoming a necessity for mass market consumers, and
     Internet usage is continuing to increase.  America Online's members are now
     spending 65 minutes as day online, versus 20 minutes a day three years ago.
     And industry metrics show that today there are over 600 million IMs, versus
     37 million IMs three years ago.  This tremendous growth in Internet use
     will serve as an enabler for the creation of major line extensions and the
     development of whole new businesses.

     Convenience is a key component in reaching mass market consumers, as mass
     market consumers tend to seek convenience in their Internet experience.
     AOL Time Warner will have an unmatched ability to provide convenience
     through a full range of interactive services delivered across current and
     emerging platforms.

     As Internet usage increases, branded content will become more important and
     brands will win the battle for consumer attention.

     The established and habitual relationships that both America Online and
     Time Warner have developed with their consumers will provide the building
     blocks that are critical for mass marketing.  In addition, these
     relationships will provide a powerful base for AOL Time Warner to use
     America Online's and Time Warner's existing businesses to create
     incremental growth and to launch whole new businesses.

Q.   What are some of the reasons you expect the combination of America Online
     and Time Warner to be successful?

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A.   AOL Time Warner will have an array of world-renowned brands that encompass
     new digital destinations and vibrant franchises with solid customer
     relationships.  The breadth of these brands--a lineup that includes Time,
     AOL, CNN, The WB, Netscape, People, Sports Illustrated, Digital City,
     Cinemax, AOL Moviefone, Cartoon Network, Spinner, AOLCOM, Entertainment
     Weekly,  Winamp and Looney Toons--will give AOL Time Warner an tremendous
     portfolio.  AOL Time Warner will also have over 112 million subscribers.
     In addition, based solely on the reach of Time Warner's network
     programmings (with over 300 million viewers per week) and magazines (which
     have a weekly audience of approximately 200 million), AOL Time Warner will
     have a monetizable footprint for a consumer touch (or a consumer
     relationship) on a monthly basis of approximately 2-1/2 billion.  By
     including a lot of duplication in the numbers, this monetizable footprint
     provides several approaches--several understandings--of a particular home
     that AOL Time Warner can use in cross-selling.

     AOL Time Warner will have access to broad distribution channels that are
     multi-platform.  In particular, Time Warner's cable systems are expected to
     serve as an incubator for incremental subscriber growth.  By providing an
     important distribution platform of America Online's interactive services,
     Time Warner's broadband delivery systems are expected to provide a means of
     using America Online's existing customer base of over 135 million
     registered users as a foundation for attracting subscribers to new
     businesses.

     AOL Time Warner will have tremendous scale and financial flexibility and
     will be able to build on a solid investment-grade balance sheet,
     substantial cash flow and financial capacity.

     AOL Time Warner will be managed by individuals who have already
     demonstrated themselves to be among the tops in their fields.  They have
     the capability and the experience to create one of the most respected
     global companies in the world.   More importantly, because all mergers are
     about execution--about people working together to integrate existing
     businesses and to develop new businesses--through the meetings that have
     already taken place, employees of both America Online and Time Warner have
     already indicated that, once America Online and Time Warner are combined,
     there will be a good "people match" in which all employees work together to
     expand existing businesses and to develop new businesses.

     Like all successful companies of the future, AOL Time Warner is expected to
     be a completely integrated company, with multi-platforms to take 

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     advantage of new technologies. As a result, AOL Time Warner will be able to
     extend the growth of America Online's and Time Warner's existing assets and
     to develop whole new businesses.

Q.   What conditions are there to closing the deal?

A.   The principal conditions include federal and foreign regulatory approvals
     and local regulatory approvals for the transfer of Time Warner cable
     systems as well as approvals of Time Warner's and AOL's stockholders.

Q.   Do you foresee any regulatory problems?

A.   AOL Time Warner doesn't involve the sort of concentration that invites
     government attention.  The Internet can never be controlled by one or two
     companies, the way television once was.  This is the first truly limitless
     medium in history.  Our merger isn't a case of one media company buying
     another in order to dominate a market.  Time Warner doesn't anticipate
     regulatory challenges.

Q.   What percentage of the combined company will the respective shareholders of
     each company own?

A.   When complete, America Online's shareholders will own approximately 55% and
     Time Warner's shareholders will own approximately 45% of the new company.

Q.   What are the exchange ratios?

A.   Under the terms of a definitive merger agreement approved by each company's
     board of directors, Time Warner and America Online stock will be converted
     to AOL Time Warner stock at fixed exchange ratios.  The Time Warner
     shareholders will receive 1.5 shares of AOL Time Warner common stock for
     each share of Time Warner common stock they own. America Online
     shareholders will receive one share of AOL Time Warner common stock for
     each share of America Online common stock they own.

     Holders of each series of Time Warner convertible preferred stock will
     receive one share o a substantially similar series of AOL Time Warner
     convertible preferred stock for each share of Time Warner convertible
     preferred stock they own.

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Q.   What accounting treatment will be given to the transaction?

A.   The merger will be accounted for as a purchase transaction and is currently
     expected to be accretive to America Online's cash earnings per share before
     the amortization of goodwill.

Q.   Will the merger be effected on a tax-free basis to stockholders?

A.   Yes.



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     AOL Time Warner Inc., together with Time Warner Inc. and America Online,
Inc., filed a preliminary joint proxy statement/prospectus regarding the
proposed business combination transaction referenced in the foregoing
information with the Securities and Exchange Commission.  In addition, AOL Time
Warner, Time Warner and America Online will prepare and file a definitive joint
proxy statement/prospectus and other documents regarding the proposed
transaction with the Commission.  Investors and security holders are urged to
read the definitive joint proxy statement/prospectus, when it becomes available,
because it will contain important information.  The definitive joint proxy
statement/prospectus will be sent to stockholders of Time Warner and America
Online seeking their approval of the proposed transaction.  Investors and
security holders may obtain a free copy of the definitive joint proxy
statement/prospectus (when it is available) and other documents filed by AOL
Time Warner (as well as by America Online and Time Warner) with the Commission
at the Commission's web site at www.sec.gov.  The definitive joint proxy
statement/prospectus and these other documents may also be obtained for free by
America Online stockholders by directing a request to:  America Online, Inc.,
22000 AOL Way, Dulles, VA 20166, Attention:  Investor Relations, telephone:
(703) 265-2741, e-mail:  AOL IR@aol.com, and by Time Warner stockholders by
directing a request to Time Warner Inc., 75 Rockefeller Plaza, New York, NY
10019, Attention:  Shareholder Relations, telephone:  (212) 484-6971, e-mail:
investrequest@twi.com.

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