AOL and Time Warner Announce MergerAired January 10, 2000 - 2:33 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NATALIE ALLEN, CNN ANCHOR: Our top story is the acquisition announced today of CNN's parent company, Time Warner, by America Online. AOL, the world's largest Internet service provider, will pay $166 billion for Time Warner, the world's largest communications and entertainment company. The new company will be known as AOL-Time Warner and will be worth an estimated $350 billion once the deal is approved and completed.
For many consumers, it means their TV sets may start to act more like personal computers and vice versa.
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JAMES LEDBETTER, NEW YORK BUREAU CHIEF, "INDUSTRY STANDARD": Most people looking at this are saying that the reason that AOL wants to get involved with Time-Warner is less so that they can have sort of Bugs Bunny to put on AOL and more so they can get "Road Runner," which is the Time Warner fast modem that will soon be offered to tens of millions of cable subscribers and that AOL has no way -- until now has had no way to get into homes using the faster connection.
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ALLEN: So there you have it.
News of the merger sent Time Warner stock soaring, lifting many other companies on a rising tide known as a rally. It was especially beneficial to many Internet stocks on the Nasdaq.
For more on what's happening at the markets today, let's go to Charles Molineaux at CNN's financial desk. He's in New York -- Charles.
CHARLES MOLINEAUX, CNN CORRESPONDENT: Yes, Natalie, neither Time Warner nor America Online trades on the Nasdaq, but you can -- you can certainly see the effect of their merger in the Internet stocks and in some of their competitors, which do trade here. The Goldman Sachs Internet index gains 7 percent so far today, a very powerful performance. And take a look at Microsoft, for example, which is of course a major player on the Internet with its MSN network and also with media partnerships as MSNBC.
Excite@Home is one of the big players in that high-speed Internet access. Excite@Home delivers service over cable modems, precisely the kind of service that AOL was hoping to get to offer to its customers by getting involved with Time Warner. We see Excite@Home was up by more than a dollar, almost two at this point, or 4.3 percent on the day today.
Another big player is Yahoo!, up 8 percent, $35 gain for Yahoo!, 36 right now. The Internets have been very hot and there's a lot of attention being focused on these stocks as potential takeover targets or partnerships going forward. This is obviously another player there.
RealNetworks actually delivers video and audio over the Web. It is up by $11, or 8 1/2 percent.
Another big Web player, of course, is Lycos, which has gained almost $9, or 12 percent on the day today.
The Nasdaq composite itself continues to show a lot of strength after getting beating up last week and pulling a minor recovery on Friday. We're seeing it once again surge. It is actually up by 153 points at 4,036: well above, once again, that historic 4,000 level. And more stocks are going up than down on the Nasdaq by a 7-to-6 ratio. So there's a lot of participation in this rally and we're seeing a lot of enthusiasm attached to these technology stocks in general, and yes, the Internet stocks in particular.
Reporting live from the Nasdaq marketsite, Charles Molineaux for CNN.
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LOU WATERS, CNN ANCHOR: Ted Turner's having a nice day, the founder of CNN and largest single owner of Time Warner stock. His holdings, 97 million shares.
We got out our calculator just a short while ago. At the close of trading Friday, at a share price of $64.75, Turner's stock was worth about $6.28 billion. Under terms of today's AOL agreement, Turner's stock, by a rough calculation, rose to an estimated $10.67 billion.
You can see why the boss is excited.
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TED TURNER, VICE CHAIRMAN, TIME WARNER: Shortly before 9 o'clock last night, I had the honor and privilege of signing a piece of paper that irrevocably casts a vote, the first vote taken, a vote of my 100 million shares, more or less, for this merger.
And I -- I did it with -- with as much or more excitement and enthusiasm as I did on that night when I first made love some 42 years ago.
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WATERS: The boss. Those number we gave regarding the worth of Turner's stock were ballpark figures, of course, presumably accurate within a few tens of millions of dollars. Either way, it looks like a nice pay day for Ted Turner and we're happy for him.
The AOL-Time Warner merger must first receive the approval of stock holders, as you know, and get the blessing of federal regulators in Washington before it becomes a done deal.
CNN's Charles Bierbauer joins us now from Washington with more about that -- Charles.
CHARLES BIERBAUER, CNN CORRESPONDENT: Well, Lou, now this merger falls into Washington's alphabet soup. That's the FTC, FCC, DOJ, or the Department of Justice, Federal Trade Commission and Federal Communications Commission. Actually, they're going to have to huddle and decide which of those agencies will oversee the regulatory process over the next several months, bearing in mind that Steve Case and Gerald Levin said they'd like to have this done by the end of the year.
And they emphasized that this is a unique situation. We are taking a large Internet company, which is a largely unregulated industry, and the Time-Warner cable and all of that, which is a largely regulated industry, and they're going to have to figure out how to blend those under Washington's existing guidelines.
What seems to be significant, according to most analysts, is that this is a vertical integration: that is to say the two companies don't do the same kinds of things. One is an Internet provider; one is a content provider. Different, for example, than the recent gas company merger where you have Mobil and -- and I believe it's Mobil and Exxon, the two gas companies coming together. They do the same kind of thing. That's called a horizontal merger, and that gets probably even closer scrutiny.
There is concern about the broadband access. That's sort of a bigger sausage to stuff more content through to our television sets and our Internet provider systems. And that will take some scrutiny. But both Mr. Case and Mr. Levin said they want to make that available as much as possible.
Competition will be a concern: How many people have access to it? Will it eliminate competition? That's probably the biggest question.
And Congress too -- Senator Leahy, a Democrat on the Judiciary Committee, says, we ought to take a look at it as well. All of that coming up.
Charles Bierbauer, CNN, live from Washington.
ALLEN: Thank you, Charles.
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