Architect of new Time Warner says it must split
Steve Case, one of the architects of the “deal of the century” that created the modern Time Warner, said that the company should be split up only five years after the deal was announced.
Mr Case was the founder of America Online, which bought Time Warner, an established media group, at the height of the dot-com bubble.
AOL’s disappointing performance subsequently hurt the combined group badly and cost Mr Case his seat on the company’s board.
“It’s now my view that it would be best to ‘undo’ the merger by splitting Time Warner into several independent companies and allowing AOL to set off on its own path,” Mr Case said, reflecting recent calls for a four-way break-up made by the billionaire investor Carl Icahn.
Time Warner is the world’s largest traditional media group and is the product of a string of mergers. Its principal businesses are Warner Brothers and New Line cinema, the leading group of Hollywood studios, Time Inc, the world’s largest magazine publisher, a cluster of US cable assets plus AOL.
Under the management of Dick Parsons, Time Warner has been trying to end AOL’s reliance on profitable but rapidly declining dial-up Internet access and turn it into an web portal along the lines of Yahoo!. The group has also considered turning AOL into a joint venture and has had talks with Microsoft and Google.
However, Mr Case rejected these plans as insufficient. “Given that Time Warner failed to capitalise on AOL’s potential during a period when it owned 100 per cent of AOL, it seems doubtful that a scenario in which it has a lesser, but still controlling, stake will work better,” he said.
Mr Case was a key architect of the merger of AOL and Time Warner and served as chairman of the merged company until 2003.
He stepped down as a board member in October, but still holds more than $250 million (£141 million) of Time Warner stock, making him one of the largest individual shareholders in the business.
He said that he proposed to the board in July that the company be split into four entities — Time Warner Cable, Time Warner Entertainment, Time Inc and AOL. However, break-up proposals have been repeatedly rejected by Time Warner’s management, led by Mr Parsons as chief executive.
“Time Warner has proven to be too big, too complex, too conflicted and too slow-moving — in other words, too much like a classic conglomerate — to seize new opportunities,” Mr Case said.
Mr Icahn is leading a group of investment funds holding 3 per cent in shares and options of the media company. The dissident shareholder group — which is separate from Mr Case — has engaged investment bank Lazard to seek ways to boost Time Warner shares and is considering putting together a rival slate of directors for election. However, it is not clear that the rebels have the voting power to succeed.
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