AOL, Microsoft announce $1.056 billion patent deal

A patent sale agreement between AOL and Microsoft is expected to result in proceeds of $1.056 billion.

AOL has entered into a definitive agreement with computing giant Microsoft to sell over 800 of its patents and a number of relevant patent applications.

Microsoft Corporation will also be given a non-exclusive license to the patent portfolio AOL retains; resulting in proceeds of $1.056 billion in cash.

After the sale is completed, AOL will still hold over 300 patents and patent applications related to advertising, content generation, content management, multimedia and security. It will also retain a license to use the patents being sold to Microsoft.

AOL expects to sell the stock of one of the subsidiaries as part of the transaction; resulting in taxes connected with the sale being rendered immaterial. It plans to utilize approximately $40 million of existing deferred tax asset to offset charges related to its remaining patent portfolio.

The board of directors at AOL intend to forward on a 'significant' amount of the proceeds to shareholders.

"The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio," said Tim Armstrong, AOL's Chairman and CEO.

"We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value."

The transaction is expected to be complete by the end of 2012.