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Time Warner to spin-off AOL

by Scott Bicheno on 28 May 2009, 15:42


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Seemed like a good idea at the time

Time Warner has announced plans to undo the $124 billion merger between itself and AOL, which led to record losses, by the end of this year.

The merger, completed at the height of the dotcom bubble, was supposed to create a ‘clicks and mortar' media powerhouse, but the anticipated advantages of combining old and new media never materialised.

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, said Time Warner chairman and CEO Jeff Bewkes.

"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."

In other words, the deal was a bad move. At the time of the deal, the combined company was valued at around $350 billion. Time Warner's market cap at time of writing was $27.2 billion. Time Warner plans to buy the five percent of AOL it doesn't currently own from Google.


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