Time Warner preps for AOL spin-off; Google's 5% stake worth $283 million

Time Warner on Monday said that it bought back Google's 5 percent stake in AOL for $283 million. The deal, disclosed in regulatory filings, was part of a series of disclosures to set in motion Time Warner's spin-off of AOL as an independent company.

Time Warner on Monday said that it bought back Google's 5 percent stake in AOL for $283 million. The deal, disclosed in regulatory filings, was part of a series of disclosures to set in motion Time Warner's spin-off of AOL as an independent company.

In 2005, Google paid $1 billion for that 5 percent stake in AOL.

Time Warner and AOL Inc. filed documents with the Securities and Exchange Commission to outline details of the spin-off. Here's the primary document and Time Warner's filing.

The filings don't detail the timing or share distribution for the spin-off. Time Warner shareholders will receive an undisclosed amount of shares some time this year.

While the filings don't disclose anything groundbreaking AOL does talk about its multi-year strategy. The master plan revolves around expanding content, pursuing local and mapping opportunities, bolstering its communications tools and growing AOL's ad network.

Much of what's in the SEC filing has been outlined by AOL CEO Tim Armstrong in a recent series of interviews. Among the notable passages from the AOL filing:

We view our subscription access service as a valuable distribution channel for AOL Media.  Our access service subscribers are important users of AOL Media and engaging both present and former access service subscribers is an important component of our strategy.  In addition, our subscription access service will remain an important source of revenue and cash flow for us in the near term.

And.

To facilitate the ongoing use of various intellectual property by each of AOL and Time Warner, we intend to enter into an Intellectual Property Cross-License Agreement with Time Warner that will provide for reciprocal licensing arrangements.  We also intend to enter into various other commercial agreements with Time Warner.

And this passage, which is notable given the reported Microsoft-Yahoo search talks:

We do not own or control a general text-based web search service.  Instead, Google is, except in certain limited circumstances, the exclusive web search provider for AOL Media.  In 2008, search advertising revenues comprised approximately one-third of our total advertising revenues and was the only category of our advertising revenues that grew year-over-year.  Changes that Google has made and may unilaterally make in the future to its search service or advertising network, including changes in pricing, algorithms or advertising relationships, could adversely affect our advertising revenues.  Furthermore, except in certain limited circumstances, we have agreed to use Google’s algorithmic search and sponsored links on an exclusive basis in the United States through December 19, 2010.  Upon expiration of this agreement, there can be no assurance that the agreement will be renewed, or, if the agreement is renewed, that we would receive the same or a higher revenue share as we do under the current agreement.  In addition, there can be no assurance that if we enter into an arrangement with an alternative search provider the terms would be as favorable as those under the current Google agreement.  Even if we were to enter into an arrangement with an alternative search provider with terms as or more favorable than those under the current Google agreement, such an arrangement might generate significantly lower search advertising revenues for us if the alternative search provider is not able to generate search advertising revenues as successfully as Google currently does.

Because we do not own or control such a search service, we are not able to package and sell search advertising along with display advertising services outside of AOL Media.  As search advertising represents a significant portion of online advertising spending, we believe that our lack of a proprietary search service could adversely affect our ability to maintain and increase advertising revenues.

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