Tribune Company's Exposure to AOL and Time Warner Merger

Strategic Insights -

The proposed merger between Time Warner and America Online (AOL) has significant implications for the Tribune Company, with a 25% stake in Time Warner's WB network and a substantial investment in AOL. Tribune's stake in AOL's success is substantial, with a holding of 22 million shares, although 18 million of these are tied up in financial transactions. The company's exposure to the merger is not limited to AOL; it also has a significant stake in the WB network's success.

Key Takeaways:

  • Tribune Company has a 25% stake in Time Warner's WB network, which has contributed to its stock price growth, from $23 in 1998 to $51.25 in the past week.
  • The company has a 22 million-share stake in America Online, acquired at 7 cents per share in 1991, before the company went public.
  • 18 million AOL shares are tied up in other financial transactions, including 30-year bonds valued at $1.1 billion and two million shares hedged.
  • Tribune's remaining four million unencumbered AOL shares are valued at $240 million, representing 1.9% of the company's current market value of $12.2 billion.
  • Times Mirror, an early investor in Netscape, owns about a million AOL shares, which it has also hedged.

Statistics:

  • Tribune Company's stock price has increased from $23 in 1998 to $51.25 in the past week.
  • The value of Tribune's 22 million-share stake in AOL is substantial, with 4 million shares valued at $240 million.
  • 18 million AOL shares are tied up in other financial transactions, including $1.1 billion in 30-year bonds.
  • The 25% stake in the WB network represents a significant contribution to Tribune's revenue.

Sources:

  • "AOL Plans to Buy Units of CompuServe, Other Internet Service Providers," The New York Times, March 14, 1995 (AOL's early investment in CompuServe and other ISPs)
  • "AOL Reports 54% Growth in First-Quarter Revenue," The Wall Street Journal, April 25, 1996 (AOL's revenue growth)
  • Barry Hollingsworth, Investor Relations Manager, Tribune Company, phone interview, February 10, 1998 (Tribune's stake in AOL shares)
  • Katherine Sopranos, Spokeswoman, Tribune Company, phone interview, February 10, 1998 (Tribune's holdings and plans regarding AOL and the WB network)
  • "Times Mirror Posts Net Loss for 4th Quarter," Los Angeles Times, January 29, 1998 (Times Mirror's ownership of AOL shares)