New York — Time Warner Inc. on Monday said that it has repurchased Google Inc.’s 5% stake in AOL for $283 million, in a transaction that values AOL at less than $5.66 billion, the Internet company said in a U.S. regulatory filing.
Time Warner, which announced plans in May to spin-off AOL by the end of the year, repurchased the stake from Google on July 8, AOL conveyed in the filing with the U.S. Securities and Exchange Commission.
The price Time Warner paid for Google’s stake suggests that AOL has a total value of about $5.7 billion. The separation will be realized by way of a pro-rata dividend of AOL shares held by Time Warner to its shareholders and post-spin-off, Time Warner shareholders will own 100% of the outstanding shares of common stock of AOL.
The company stated that it has not determined its dividend policy as yet, but plans to do so prior to the spin-off.
When Google acquired a 5% stake in AOL for $1 billion in 2005, it valued the unit at about $20 billion. Google, based in Mountain View, Calif., wrote down $726 million of the investment last year. Time Warner in a regulatory filing mentioned that the value includes Google’s share of cash distributions it has.
Further, AOL said in a statement that it anticipates to incur about $90 million of restructuring charges throughout the remaining nine months of 2009. For the first quarter, the company incurred restructuring charges of $58.3 million related primarily to job cuts and facility closures.
The filing is a process of registration with the government that AOL must conclude before its long-expected separation from Time Warner, and brings the company one step closer to ending a troublesome eight-year-old merger.
Brigantine Advisors analyst Colin Gillis said the implied $5.7 billion AOL valuation from purchasing Google’s stake represents a "floor valuation" as AOL moves toward a spin-off.
"It should not be anything lower than that," said Gillis.
The regulatory filings also furnished details about the compensation for Timothy Armstrong, the Google ad sales executive whom the Time Warner recently appointed as chief executive of AOL.
Tim Armstrong has a three-year agreement with AOL and will earn at least $1 million per annum in salary and up to $4 million per annum in incentives. Armstrong would also be entitled to $10 million worth of options and restricted stock for each of 2009 and 2010 to make up for compensation he gave up to leave Google.
After the spin-off, the independent company will be called AOL Inc. and will be traded on the New York Stock Exchange under the symbol AOL, the filing added.
Time Warner shares rose 2 cents to close at $27.60 on the New York Stock Exchange. Google shares fell $1.92 to close at $444.80 on the Nasdaq stock market.