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Levin reasoned that Time Warner without an Internet connection was still valuable, but its value to an Internet buyer was greater. So he arrived at 1.5 AOL shares to be exchanged for each TWX share. In real money, that was 70% more than Time Warner's $65 price the Friday before the deal was announced, but it would still give AOL shareholders 55% of the company. Conversely, Time Warner was providing 80% of the cash flow. Says Levin: "If some people think that AOL has been sold at too much of a discount or Time Warner has been sold at not a high enough premium--if we get those disparate reactions--then we've probably done the right thing." Although both companies have done handsprings to portray the combination as a merger of equals, Wall Street has since made it clear that it considers AOL more equal than Time Warner.
The deal finally became real on the night of Jan. 6 at a dinner for Case, Levin, Novack and Bressler at Case's northern Virginia house. What began with a bottle of 1990 Chateau Leoville-Las Cases ("dazzling concentration, as well as fine acidity"--wine critic Robert Parker) in the living room and ended with chocolate mousse at the table became semiofficial when Case and Levin broadly agreed to a merger. They also agreed to sleep on it, and after midnight Bressler and Levin flew back to New York on a Time Warner jet. Novack and Bressler spoke at 9 the following morning, checked in with their respective bosses and had a deal at 9:15. As one of the supporting actors put it, "At a certain point they had to swallow hard and jump off the cliff together."
Whether they'll land on their feet depends on whether the two companies can mesh their organizations, persuade Wall Street that the deal makes sense and endure the federal regulatory reviews and potential legal challenges of the next several months.
The first task will probably be the hardest. In many ways, the pre-deal Time Warner was less an operating company than it was a stock price, the financial expression of a series of disconnected assets. Unlike other media megaliths like Disney or News Corp., where a nearly totemic central figure--Michael Eisner and Rupert Murdoch, respectively--conceives the strategy and orders it into place, Time Warner under Levin has been an extremely successful dysfunctional family. Six powerful executives, ranging from Roger Ames of the music group to Terry McGuirk of the Turner networks, run six huge businesses, and their rivalry with external competitors often consumes less energy than their alpha-male, intramural head butting. When the cable division wanted to brand its high-speed cable-modem business Road Runner, the Warner Bros. marketers--with straight faces--tried to extract a billion-dollar licensing fee from their corporate brethren for use of the cartoon bird. If any one thing has made Levin a success, it is his long-range strategic vision. But his willingness to let his managers run their businesses as they see fit--as long as they deliver double-digit earnings growth--runs a close second.