Time Warner sets AOL spin-off; Separation 'best outcome'; Worth $5 billion?

AOL will be an independent publicly traded company again as Time Warner solidified plans to spin off the ailing unit, which some analysts estimate to be worth about $5 billion.In a statement Thursday, Time Warner put more meat on its plans to spin off AOL.

AOL will be an independent publicly traded company again as Time Warner solidified plans to spin off the ailing unit, which some analysts estimate to be worth about $5 billion.

In a statement Thursday, Time Warner put more meat on its plans to spin off AOL. Executives stated that the AOL separation would occur on its last earnings call. In addition, Time Warner named former Google exec Tim Armstrong CEO in March.

Under Time Warner's plan shareholders will get shares of AOL in a tax-free transaction. In the meantime, Time Warner will buy back the 5 percent interest in AOL that Google owns in the third quarter. Time Warner said it plans to complete the spin-off "around the end of the year." Benchmark analyst Frederick Moran reckons that AOL is worth about $5 billion, or $4 per Time Warner share.

Here's how Moran comes up with his $5 billion figure:

  • AOL's dial up business is worth roughly $1.5 billion based on the valuation of EarthLink;
  • AOL's ad group, including Platform A, is worth $3.8 billion.

Despite its troubles operating inside of Time Warner, AOL still has a lot of assets at its disposal. AOL has 107 million unique visitors a month, display ad networks and a declining Internet access business that still throws off cash.

Time Warner CEO Jeff Bewkes said:

We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.

Armstrong said:

Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options. We play in a very competitive landscape and will be using our new status to retain and attract top talent. Although we have a tremendous amount of work to do, we have a global brand, a committed team of people, and a passion for the future of the Web.

As an independent company AOL will be able to acquire Web properties with its own stock, pursue transactions for its Internet access business with EarthLink and generally be more nimble.