AOL To Spin Off From Time Warner And Go Public

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Last night the Board of Directors at Time Warner agreed to spin off AOL as its own entity once again.  AOL will become an independent and public company.

“We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company,” stated Time Warner Chairman and CEO Jeff Bewkes

AOL currently reaches about 107 million unique visitors per month on all of their services.  AOL will continue to operate as an ISP too.

As of right now, Time Warner owns 95% of AOL and Google owns 5%.  After the spin off is complete, Time Warner will buy back the 5% from Google in the third quarter of 2009.  Time Warner shareholders will end up owning 100% of outstanding interests in AOL.  The transaction will be tax-free to Time Warner shareholders and is contingent upon review of the SEC.

In January 2000, AOL acquired Time Warner for $164 billion.  After the merger was complete, AOL began to see their ISP division profits plummet, causing them to report a loss of $99 billion in 2002.  Steve Case was removed as Chairman and was replaced by Richard Parsons.  “AOL” was dropped from the company name “AOL Time Warner.”

The press release of the spin off is available after the jump:

Time Warner Inc. (NYSE:TWX) today announced that its Board of Directors has authorized management to proceed with plans for the complete legal and structural separation of AOL from Time Warner. Following the proposed transaction, AOL would be an independent, publicly traded company.

Time Warner Chairman and Chief Executive Officer Jeff Bewkes said: “We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.”

After the proposed separation is complete, AOL will compete as a standalone company – focused on growing its Web brands and services, which currently reach more than 107 million domestic unique visitors a month, as well as its advertising business, which operates the leading online display network that reaches more than 91% of the domestic online audience. AOL will also continue to operate one of the largest Internet access subscription services in the U.S.

AOL Chairman and Chief Executive Officer Tim Armstrong said:  “This will be a great opportunity for AOL, our employees and our partners.  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.”

Today, Time Warner owns 95% of AOL, and Google holds the remaining 5%. As part of a prior arrangement, Time Warner expects to purchase Google’s 5% stake in AOL in the third quarter of 2009. After repurchasing this stake, Time Warner will own 100% of AOL. Accordingly, once the proposed separation is completed, Time Warner shareholders will own all of the outstanding interests in AOL.

The proposed transaction will be structured as tax-free to Time Warner stockholders. The transaction is contingent on the satisfaction of a number of conditions, including completion of the review process by the Securities and Exchange Commission of required filings under applicable securities regulations and the final approval of transaction terms by Time Warner’s Board of Directors. Time Warner aims to complete the proposed transaction around the end of the year.

This article was written by Amit Chowdhry. You can follow me at @amitchowdhry or on Google+ at
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