TIME WARNER will spin off the whole of its AOL internet business by the end of this year, the US media group confirmed yesterday, bringing the curtain down on one of the biggest and worst deals in history.
AOL’s all-share acquisition of the venerable home of Time magazine and Warner Bros films, completed in 2001, came to symbolise “old media” companies’ capitulation to digital upstarts at the height of the dotcom boom.
The deal, which valued Time Warner at $164 billion, was followed by huge writedowns, including a $100 billion charge as quickly as 2002, as it became clear that the synergies it promised were illusory.
Steve Case, the former AOL chief executive and one of the architects of the deal, used the Twitter messaging service yesterday to say he was glad the separation was happening.
Thomas Edison’s quote that vision without execution is hallucination “pretty much sums up AOL/TW” he said, adding that a “failure of leadership [myself included]” scuppered early hopes for the combination.
The bitterness left behind was summed up by one shareholder at Time Warner’s annual meeting yesterday, who said that January 11th, 2001, the day the AOL Time Warner deal was completed “is a date I believe will live in corporate and economic infamy”.
The separation, expected to be structured as a tax-free spin-off to shareholders, will realise the ambition of Jeff Bewkes, Time Warner chief executive, to slim his group down to one focused on creating TV, film and publishing content.
Mr Bewkes told shareholders the company had not decided on a structure for the separation, but said: “It is not anticipated by us that it will be a sale. Our aim is to be the world’s best content company. We’ve decided that the separation of AOL from Time Warner is in the best interest of both companies.”
Tim Armstrong, the former Google advertising executive hired by Time Warner to run AOL, said: “Becoming a standalone public company positions AOL to strengthen its core businesses.”
Although Time Warner had contemplated selling off its declining dial-up access business, doing so while AOL was part of the conglomerate was difficult, people familiar with the matter have said.
It was not immediately clear whether the separate company would pursue the dial-up sale plan.
Time Warner will purchase Google’s 5 per cent stake in AOL, which the web search group bought in 2005 for $1 billion but has since written down to $274 million.
