The Best Deal Ever: AOL Time Warner


It's hysterical to hear Steve Case lament that his America Online acquired Time Warner. He's simply not telling the whole truth. He'd be a much poorer man if he hadn't done the $165 billion deal.

The AOL former chairman is making headlines by telling PBS' Charlie Rose that he regretted the deal:

CHARLIE ROSE: The majority of people think it was the worst merger in history.
STEVE CASE: Well, yeah, I'm more focused on the future, not the past…Just if you looked at it at this particular juncture from the context of the shareholders of AOL and the shareholders of Time Warner and — and the employees and customers it has not turned out the way certainly I expected. It has been a disappointment, but you know, it goes back to the question was it a good idea? I think it was a good idea. I'm disappointed and frustrated that it hasn't developed in the way that that we all hoped at the time it could.

CHARLIE ROSE: Are you sorry you did it or not?
STEVE CASE: Yes, I'm sorry I did it…Well, I thought it was the best course for AOL to make sure it was ensured a bright broadband future, and as part of that agreed to step aside as CEO. To make sure the deal would happen. And AOL`s broadband future has not been, obviously, what any of us would have hoped.

Ridiculous. You see, AOL's acquisition of Time Warner wasn't the worst deal, it the best, one of the most brilliant media deals of all time.

When the deal was cut in 2001, AOL was headed for disaster. The dotcom crash was coming and Case's team had been cooking the books, playing all sorts of games with advertisers to substantially overstate the company's growth. When that unraveled AOL would have absolutely met financial disaster, probably Chapter 11.

Wall Street, regulators and - most importantly - Time Warner's Gerry Levin and Dick Parsons hadn't figured this out. They all thought AOL would continue to soar. So Case was able to use his overinflated new media currency to buy control of Time Warner's solid, healthy old media assets.

Did Case know his company was heading for disaster? Or that his company was committing fraud? I don't know. Case has not personally been charged by regulators for any of the illegal accounting practices.

There's two major options here: he knew about the book cooking and was lying, or he was delusional really believed this company was as healthy as the false financial statements indicated, and had no clue as to the plight  his company faced a couple of years down the road. Lying or delusional? And which is worse?

Of course, the brilliance of the deal is seen all from the perspective of an AOL shareholder. The view from old Time Warner shareholders is of complete disaster.  They could have had 100% of financially sound cable systems, networks, magazines and a movie studio. They're the ones that have lost billions. But not Steve Case.

Now it's old Time Warner executives that are left cleaning up the AOL mess. Case is, in turn, a Forbes 400 member, worth an estimated $900 million much of that from Time Warner stock. If he hadn't done the deal, his AOL shares would have been trading on some penny stock exchange.

Wouldn't it be funfor Case and other ex-AOL executives to come clean and publicly declare that they cut the best deal ever?

By John M. Higgins