WORST MERGER EVER: I wasn't aware of the particulars of the 2000 merger deal between AOL and Time Warner until I read this scathing editorial in today's
Washington Times. Once you read it, you have to wonder what made the deal even remotely attractive to Time Warner. I mean, you don't have to be
Thurston Howell III to figure out that there wasn't anything good in it for Time Warner. Hell's bells, even
Lovey Howell would've realized it.
The Times points out that on "Jan. 10, 2000, the day the merger was announced, the combined company, based upon the closing prices of both AOL and Time Warner, would have been worth nearly $350 billion. Today, with AOL Time Warner's stock price hovering around $10 per share," the company is worth less than $50 billion.
It gets better (or, if you're an AOL TW stockholder, worse.) Just prior to the merger, Time Warner had five times more revenue than AOL, yet, as the Times reports, "the terms of the merger left Time Warner shareholders with only 45 percent of the combined company." This is particularly inexplicable since it was obvious to even novice internet industry observers that at the time of the merger, America Online was struggling to acquire and retain subscribers. And the struggle continues.
AOL's sales are nosediving because internet consumers are recognizing America Online for what it is: an unnecessary middleman. AOL offers nothing unique to its subscribers that they can't get by directly accessing the internet via a substantially cheaper internet service provider. In short, America Online is running out of reasons to exist. It is, as the Times characterizes it, "a vastly oversized anchor, pulling down the rest of the ship."
"In the annals of American business history," the Times declares "it is difficult to imagine a more lopsided, wealth-destroying merger than the one then-Time Warner CEO Gerald Levin orchestrated — to the everlasting detriment of Time Warner shareholders. They not only relinquished more than half the value of their premium media properties to dot-com upstarts, but now they must also absorb nearly half the losses related to AOL's evolving collapse."
Yet the question at the heart of AOL Time Warner matter remains unanswered. How did Gerald Levin manage to sign the merger paperwork while his head was up his ass?
