AOL will spin off from Time Warner to form a publicly traded company, but will be worth a mere fraction of its value at the time of the 2001 merger.
Just eight years after it acquired Time Warner for $164 billion in stock, the joint company's market value has sank to the point where it's worth $28 billion.
The acquisition, at the height of the tech bubble, between what was then the largest US ISP and the world’s biggest media company, was intended to take advantage of the convergence of content and connectivity. It is now a byword for failed M&A.
Time Warner yesterday confirmed the company will be spun off. “We believe that a separation will be the best outcome for both Time Warner and AOL,” CEO Jeff Bewkes said.
But he added the deal hinges on a number of factors, including the repurchase of Google's 5% stake in AOL.
In January, Google estimated this stake to be worth $274 million – valuing AOL at just $5.48 billion. Google paid $1 billion for the shares in 2005, implying AOL was then worth $20 billion.
By comparison, Google is currently valued at $129.7 billion.
Analysts told Bloomberg AOL could sell for between $6 billion and $6.3 billion.