Case 3.3 THE AOL ACQUISITION OF TIME WARNER (TWX)
C3.3.1 Merger announcement date: January 7, 2000
Share Price Number of Shares (in billions) Market CapPremerger (in billions)
AOL 72.88 × 2.6 = $189.5
TWX 64.75 × 1.4 = 90.7
Total = $280.2
New AOL shares for TWX stockholders = Exchange Ratio × TWX shares
= 1.5 × 1.4 billion
= 2.1 billion
Share Price Number of Shares (in billions) Market Cap Post-Merger
“TWX” $72.88 × 2.1 = $153.1
AOL $72.88 × 2.6 = $189.5
Total 4.7 = $342.6
What was the premium paid by AOL for TWX?
C3.3.2 The value of AOL on September 10, 2002, was $13.36, and the number of shares outstanding was 4.45 billion. What was the decline in value of AOL from its immediate post-merger market capitalization?
C3.3.3 Explain the pro forma accounting adjustments (except for the miscellaneous items) as an example of purchase accounting.
Debit (in billions)
TWX shareholders’ book equity $ 10.0
Other miscellaneous adjustments, net (30.9)
Goodwill and other intangibles 174.0
Total pro forma debit adjustments $153.1
Credit (in billions)
AOL common stock at par issued to pay for TWX $ 0.1
Addition to AOL paid-in capital 153.0
Total pro forma credit adjustments $153.1
C3.3.4 Calculate the percent of goodwill and other intangibles to total assets for AOL and for TWX premerger and for the pro forma combined company post-merger. Discuss.
C3.3.5 Calculate the percent of total liabilities and of shareholders’ equity to total assets for AOL and for TWX premerger and for the pro forma combined company post-merger. Discuss.
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more