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UPDATE 1-AOL, Time Warner shares rally after FTC oks merger
Thu Dec 14 16:55:00 EST 2000
(Recasts, adds details, updates stock price) By Reshma Kapadia and Derek Caney NEW YORK, Dec 14 (Reuters) - Shares of America Online Inc. and Time Warner Inc. rallied on Thursday after antitrust authorities approved their $112.5 billion union, the largest merger in U.S. history, after months of wrangling.
The Federal Trade Commission (FTC) voted unanimously to approve the merger after the companies made last-minute concessions, granting competitors greater access to Time Warner's cable lines and ensuring consumers have a wide choice of content. The companies expect the deal, which still requires approval from the Federal Communications Commission (FCC), to close by the end of December of in the early days of 2001. "This has been a long an excruciating process," said First Union analyst Scott Davis. "It takes much of the uncertainty out of the market. This is a company that is either No. 1 or No. 2 in every business they're in. I can't immediately think of any other combination that can compete with AOL-Time Warner." AOL shares rose around 3 percent, or $1.55, to close at $50.00 on the New York Stock Exchange. AOL is off about 48 percent since its 52-week high of $95.63 last December and about 30 percent from when it struck the deal in January. Shares of Time Warner, the No. 2 U.S. cable provider after AT&T Corp., rose 2.6 percent, or $1.90, to $74.50 on the NYSE. They reached a 52-week high of $105.50 in March and a
52-week low of $57.51 in October. Some analysts had expressed concerns that the government would exert to heavy a hand in the deals the combined company makes with ISPs that would ultimately constrict the companies and ultimately its share value. "That doesn't appear to be the case," said William Blair & Co. analyst Abhishek Gami. "The conditions set out are not out of line. But AOL Time Warner will have to aggressively go out and attract customers to its cable lines. We don't expect it to be an issue." The marriage will create an entertainment and online juggernaut, with content ranging from Bugs Bunny and Time Warner's many other film and music properties, Time and People magazines, HBO and CNN cable TV networks. AOL, the world's largest Internet services provider, has nearly 29 million subscribers, instant messaging services and the Netscape Netcenter business. The remaining risk, Gami said, is how well the two companies execute their business strategy. "Time Warner has one of the greatest stables of entertainment assets," he said. "AOL has a huge customer base and is a potential leader in digital distribution. The two companies now have to show they can make it work." The two companies' shares took a beating after the deal was struck in January amid initial concerns the merger would slow AOL's growth. More recently a general cloud over the Internet sector has pressured AOL shares, cutting the value of the deal by about one third from $164 billion when it was announced. "Investors may take more of a wait and see approach and need actual proof that the merger is going to create benefits (after an FTC approval)," said Fred Moran, analyst at Jefferies & Co. "I think the stocks go up on the merger approval because both companies clearly stand to benefit to be part of a more dominant company," said Moran. The FTC's conditions on the approval apply for five years, but if Time Warner fails to enter into agreements with additional rival Internet service providers in the required time period, the FTC may appoint a trustee with authority to agree on deals. Time Warner extended a hand toward one AOL rival last month, reaching a deal with Earthlink Inc., the nation's No. 2 Internet Service Provider, to offer high-speed Internet service in the second half of 2001.
Rtr 16:55 12-14-00
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