Time Warner announced plans on May 28 to spin off its troubled AOL Internet unit by the end of the year, bringing to a close one of the most disastrous corporate mergers in history. The US media and entertainment giant said its board had approved a separation from AOL, formerly known as America Online, to make it an independent, publicly traded company.
"We believe that a separation will be the best outcome for both Time Warner and AOL," Time Warner chairman and chief executive Jeff Bewkes said. "We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company," he said in a statement.
Time Warner said that before the spin-off goes ahead it will purchase the five percent in AOL owned by Internet search and advertising giant Google, which paid one billion dollars in 2006 for the stake. Time Warner owns the remaining 95 percent of AOL, which saw its heyday as a provider of dial-up service in the early days of the Internet but has been losing ground as consumers switch to high-speed or broadband services.
Once the proposed separation is complete, Time Warner shareholders will own all of the outstanding interests in the Dulles, Virginia-based AOL, according to the plan. Time Warner said it aims to complete the separation, which will have to be approved by the Securities and Exchange Commission, around the end of the year. An independent AOL would be free to focus on growing its Web brands and services and its advertising business, according to Time Warner.
"This will be a great opportunity for AOL, our employees and our partners," said AOL chairman and chief executive Tim Armstrong, who was hired away from Google in March to run the division.
"Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options," Armstrong said.
Time Warner merged with America Online in 2001 at the height of the dot-com boom, with AOL using its inflated stock as a currency for the transaction.
But the marriage of old and new media behemoths baptized as AOL Time Warner quickly went sour as benefits promised to shareholders failed to materialise.
AOL was valued at more than 150 billion dollars when the ill-fated merger was announced but its worth collapsed dramatically as the dot-com bubble burst.
Time Warner was forced in 2002 to massively write down the value of the Internet unit and the AOL name was removed from the group's corporate title in 2003.
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