Time Warner to Spin Off AOL By End of 2009

By Geoff Duncan May 28, 2009

Time Warner to Spin Off AOL By End of 2009

Back in the dim mists history—that would be the year 2000—the merger of content conglomerate Time Warner with online powerhouse AOL was one of the biggest deals in corporate history, signaling a new age of digital synergy that would reshape the media and online worlds for years to come. However, the companies’ cultures didn’t mix, AOL lost its place at the head of the pack bringing U.S. consumers to the Internet, and Time Warner has decided it just wants to be in the content business rather than a vertically-integrated media monstrosity. Now, Time Warner’s board has authorized its management to get on with plans to spin AOL back into its own independent, publicly-traded company in a deal that, though it requires regulatory approval, should have zero impact on Time Warner shareholders.

“We believe that a separation will be the best outcome for both Time Warner and AOL,” said Time Warner CEO and chairman Jeff Bewkes, in a statement. “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.”

AOL has not fared well since its merger with Time Warner; the company has been subject to numerous writedowns as the value of its assets and user base has shrunk and the online advertising market contracted. Time Warner tried splitting AOL in two and creating an Internet-based version of AOL that focused on online advertising and attracting usership through free services (many of which were acquired through acquisitions), but those failed to generate enough momentum to keep Time Warner interested in the operation.

As part of the deal, Time Warner will buy up Google’s 5 percent stake in AOL (which Google bought back in 2005) so it has complete ownership of AOL when the company is spun off. As a sign of AOL’s declining fortunes, Google’s 5 percent buy-in back in 2005 valued AOL at about $20 billion; at the beginning of 2009, Google wrote down the investment, implying that it felt AOL was then worth a mere $5.5 billion.

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Geoff Duncan writes, programs, edits, plays music, and delights in making software misbehave. He's probably the only member…

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