AOL Time Warner

AOL Investor Fred Grant surprised and 10 January 2000 announcement of the AOL Time Warner merger disappointed. He had bought the lucky AOL at $ 40 in October 1999, shortly before the rapid increase in share to $ 95 in mid-December. Although only a few days before the announcement of the merger had settled on $ 73, the stock until 2 – at $ 57 per share February 2000 it had suffered decline. Although many observers spoke highly of the tremendous synergy between Time Warner pre … Read more »

AOL Investor Fred Grant surprised and 10 January 2000 announcement of the AOL Time Warner merger disappointed. He had bought the lucky AOL at $ 40 in October 1999, shortly before the rapid increase in share to $ 95 in mid-December. Although only a few days before the announcement of the merger had settled on $ 73, the stock until 2 – at $ 57 per share February 2000 it had suffered decline. Although many observers spoke highly of the tremendous synergies between leading Time Warner’s content, advertising, and cable distribution channels and AOL Internet brand, marketing savvy and customer base, predicted analysts that growth for the combined company in the 15% would be – 20% range, half of what is expected for his scholarship AOL farms. Analysts also warned the administration and execution risks with the enormous and unprecedented combination of Internet and traditional media companies connected. Finally, Grant was rather concerned the use of the purchase method of accounting as a pooling of the transaction on the impact of AOL Time Warner. Why should not the company use pooling accounting, like other companies had large stock for services such as NationsBank-BankAmerica, Citicorp and Travelers? Want to hurt the goodwill of the dampening effect on the outcome of the market valuation of the new company? As Grant watched his AOL stock slide in the days after the announcement of the merger, he wondered if he to sell his shares or, as some analysts have suggested, use these new lows as a buying opportunity.
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from
Mary E. Barth,
Hilary Stockton
Source: Stanford Graduate School of Business
39 pages.
Release date: 01 February, 2000. Prod #: A171-PDF-ENG
AOL Time Warner HBR case solution