Time Warner To AOL: See Ya?

AOL may be ready to be sold or otherwise separated from the Time Warner corporate apparatus, and one potential purchaser springs to mind immediately (Hi Google.)

Is Time Warner Done With AOL?
The whole of Time Warner’s parts could be greater than the whole. Discussions to separate pieces of its media empire have been underway, and AOL figured in the conversation. Company CEO Jonathan Miller told the Sunday Telegraph UK that talks to send off AOL were part of the corporate agenda:

“It’s possible, going forward. It’s not a discussion that Time Warner has a problem with understanding or engaging in. Until we were on this present course, it wasn’t even the right discussion. Now it becomes more interesting.”

“I don’t believe there is a scenario whereby we could have an independent AOL. I think we would be bought as fast as we could draw up the papers,” he said.
Commenting on his Infectious Greed blog, Paul Kedrosky noted it was “interesting watching as some of the excesses continue to unwind.”

The AOL/Time Warner merger approved in late 2000 has become regarded as the symbol of the overindulgences that took place before the dot-com crash in 2001. But whoever buys AOL, should it be spun off, should be aware of an obligation that Google holds over AOL:

The form 8-K filing Google submitted to the Securities and Exchange Commission gives a summary of the rights Google now has as part of the agreement. Google will be able to require the holding company with the AOL rights to register them for an initial public offering, July 1 of 2008 being the first date they can do so.

If Time Warner doesn’t want to see those shares go public, it will have to pay Google either cash, shares, or a mix of those depending on the appraised fair-market value of the investment at that time.
Google’s $1 billion investment in AOL should make it an early favorite to snap up a freed AOL for purchase. AOL delivers search and advertising from Google, which has shown it doesn’t mind paying substantially for traffic, given its $1.65 billion stock deal for video sharing site YouTube.

Buying AOL would keep it out of Microsoft’s hands too. Google and Microsoft fought over AOL in late 2005, with Google winning the right to continue serving ads and search results to AOL visitors.

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David Utter is a staff writer for murdok covering technology and business.