In June, the Federal Communications Commission (FCC) allowed any one media corporation to own T.V. stations reaching nearly half the nation’s viewers, when previously the limit was one-third. The FCC also allowed cross ownership. For example, a newspaper can buy TV and radio stations in the same city, creating a local monopoly.
Some would say the greater worry is large-scale media conglomerates, for example AOL’s merger with TimeWarner in 2000. Through this merger, AOL took over a long list of companies like Columbia House, 40 percent of Seattle’s Sub-Pop Records, CNN, and the Cartoon Network. AOL’s ownership extends to varied types of media, from magazines to television networks to sports teams.
Not only media outlets have been subject to corporate mergers. According to msnbc.com, Bank of America plans to buy Fleet Bank, ending up with 33 million customers and 2.5 million business clients in the U.S. and 34 other nations. The merger will create the second largest U.S. banking company, topped only by Citigroup, Inc. The combined company will have almost 5,700 banking offices and over 16,500 ATMs. Bank of America CEO Kenneth Lewis will become CEO of the combined company.
Tobacco companies R.J. Reynolds (RJR) and Brown & Williamson also plan to merge, and will call themselves Reynolds American, Inc. Combined, they will have about $10 billion in annual sales, trailing only Philip Morris USA. According to newstribune.com, these two companies combined make about one-third of the cigarettes smoked in the United States. RJR makes Camel, Winston, Salem and Doral, and Brown & Williamson makes Kool, Lucky Strike, GPC and Capri.
Brown & Williamson is British American Tobacco PLC’s U.S. subsidiary, and thus, British American Tobacco will own 42 percent of the new company, and for $2.6 billion, RJR will control 58 percent.
What effect do mergers have on the individual corporations involved? “Some mergers are good for corporations and employees while others are bad,” says Associate Professor Raymond Johnson from the Department of Accounting. “There is no general end result of the effects of corporate mergers.”
In the case of RJR and Brown & Williamson, company headquarters will be consolidated in RJR’s home of Winston-Salem. Brown & Williamson will close offices in Louisville, KY and a cigarette plant in Macon, GA. About 2500 employees will either lose their jobs or be offered transfers to North Carolina.