AOL chain-of-command remains intact
Levin will have operational control of the merged company, overseeing the co-chief operating officers, Robert Pittman and Richard Parsons. Merger documents filed by the companies Friday with the Securities and Exchange Commission show AOL Vice Chairman Kenneth Novack, AOL Senior Vice President and public-relations executive Kenneth Lerer, AOL Senior Vice President George Vradenburg and Chief Technology Officer William Raduchel will report to Case.
The executives reporting to Case can be "appointed and removed only with the chairman of the board's approval or upon action of the board," state bylaws of the new company, a copy of which was attached to the merger agreement.
They are among Case's group of advisers, which also includes Pittman, AOL president, and Michael Kelly, AOL chief financial officer. Kelly will become chief financial officer of the merged company and report to Levin.
Hefty cancellation fee
The merger agreement also details the hefty price either AOL (NYSE: AOL) or Time Warner (NYSE: TWX) would have to pay if the deal isn't completed. Should America Online
back out from the merger under certain conditions, it would pay a
stunningly high breakup fee of $5.37 billion, easily the biggest ever for a
merger. Time Warner's tab, if it chooses to end the transaction, would be
$3.9 billion.
The merger agreement reveals an additional provision, which shows how even if shareholders vote against the deal, both sides would be stuck with a pricey bill. Should AOL shareholders reject the merger, AOL would have to pay about $1.95 billion -- or 1 percent of its market capitalization on Jan. 7 -- while Time Warner would pay $1.42 billion. Such a provision is unusual although not unprecedented, merger experts say.
The merger is valued at $138.61 billion, based on AOL's price of $63.25, down $2.25, at 4 p.m. Friday on the New York Stock Exchange. Time Warner fell $2.75 to $82 on the Big Board.
Regarding the AOL executives who will still report to Case, Vradenburg advises on public-policy issues, and Raduchel on long-term technology strategy. Novack and Lerer will provide Case with "strategic counsel" at AOL Time Warner, said Kathy Bushkin, an AOL spokeswoman.
Lerer is a founder of public-relations firm Robinson Lerer & Montgomery and is maintaining a role with the firm in addition to his executive post at AOL.
"These are the people who will support Steve in his role as chairman of the new company," Bushkin said.
No palace coups
Time Warner said the arrangement was in line with the spirit of Case's role as described when the deal was announced, which was to focus on
technological developments and policy initiatives. The reporting structure
also shows Case won't be a figurehead chairman.
The Time Warner board wasn't upset by the arrangement; rather, the board wanted to make sure Case was actively involved in the business, according to a person close to the merger talks.
The bylaws of the new entity have been written in a manner to ensure that neither side easily takes control of the board or stages a palace coup. For instance, neither Levin nor Case can be removed from their posts, and their duties can't be modified, unless 75 percent of the board votes for such a change.
The new board will have eight representatives each from AOL and Time Warner so a number of directors loyal to either side would need to switch allegiances to undermine the agreed-upon management structure. The 75 percent provision stays in place until Dec. 31, 2003. This "supervoting majority" concept is fairly typical in mergers of equals.
-- Nick Wingfield contributed to this article.
America Online Inc. Chairman Steve Case will keep many of his top lieutenants reporting to him after AOL completes its merger with Time Warner Inc., rather than to Time Warner's Gerald Levin, who will be chief executive of the new company, a filing with the government shows.Levin will have operational control of the merged company, overseeing the co-chief operating officers, Robert Pittman and Richard Parsons. Merger documents filed by the companies Friday with the Securities and Exchange Commission show AOL Vice Chairman Kenneth Novack, AOL Senior Vice President and public-relations executive Kenneth Lerer, AOL Senior Vice President George Vradenburg and Chief Technology Officer William Raduchel will report to Case.
The executives reporting to Case can be "appointed and removed only with the chairman of the board's approval or upon action of the board," state bylaws of the new company, a copy of which was attached to the merger agreement.
They are among Case's group of advisers, which also includes Pittman, AOL president, and Michael Kelly, AOL chief financial officer. Kelly will become chief financial officer of the merged company and report to Levin.
Hefty cancellation fee
The merger agreement also details the hefty price either AOL (NYSE: AOL) or Time Warner (NYSE: TWX) would have to pay if the deal isn't completed. Should America Online
back out from the merger under certain conditions, it would pay a
stunningly high breakup fee of $5.37 billion, easily the biggest ever for a
merger. Time Warner's tab, if it chooses to end the transaction, would be
$3.9 billion.
The merger agreement reveals an additional provision, which shows how even if shareholders vote against the deal, both sides would be stuck with a pricey bill. Should AOL shareholders reject the merger, AOL would have to pay about $1.95 billion -- or 1 percent of its market capitalization on Jan. 7 -- while Time Warner would pay $1.42 billion. Such a provision is unusual although not unprecedented, merger experts say.
The merger is valued at $138.61 billion, based on AOL's price of $63.25, down $2.25, at 4 p.m. Friday on the New York Stock Exchange. Time Warner fell $2.75 to $82 on the Big Board.
Regarding the AOL executives who will still report to Case, Vradenburg advises on public-policy issues, and Raduchel on long-term technology strategy. Novack and Lerer will provide Case with "strategic counsel" at AOL Time Warner, said Kathy Bushkin, an AOL spokeswoman.
Lerer is a founder of public-relations firm Robinson Lerer & Montgomery and is maintaining a role with the firm in addition to his executive post at AOL.
"These are the people who will support Steve in his role as chairman of the new company," Bushkin said.
No palace coups
Time Warner said the arrangement was in line with the spirit of Case's role as described when the deal was announced, which was to focus on
technological developments and policy initiatives. The reporting structure
also shows Case won't be a figurehead chairman.
The Time Warner board wasn't upset by the arrangement; rather, the board wanted to make sure Case was actively involved in the business, according to a person close to the merger talks.
The bylaws of the new entity have been written in a manner to ensure that neither side easily takes control of the board or stages a palace coup. For instance, neither Levin nor Case can be removed from their posts, and their duties can't be modified, unless 75 percent of the board votes for such a change.
The new board will have eight representatives each from AOL and Time Warner so a number of directors loyal to either side would need to switch allegiances to undermine the agreed-upon management structure. The 75 percent provision stays in place until Dec. 31, 2003. This "supervoting majority" concept is fairly typical in mergers of equals.
-- Nick Wingfield contributed to this article.