Google ready to offload AOL stake

 

Gallery

By Stuart Turton

Posted on 5 Feb 2009 at 10:50

Google is looking to shed its stake in AOL, as the company's value plummets.

Back in 2005, Google took a 5% stake in AOL at a cost of $1 billion. However, in its fourth-quarter results last month, the search giant wrote $726 million off that investment, valuing its stake in AOL at just $274 million.

The deal saw the companies agree to collaborate on advertising and instant messaging, but it also gave Google "demand registration rights".

These rights allow Google to demand that Time Warner either buy back its 5% stake at fair market value, or spin off AOL as a public company.

It is a right Google has now exercised, with Time Warner saying only that it is reviewing its options.

"We're reviewing what we received and we're evaluating our options," says a statement from the company.

"Those options include: preceding with the request, delaying the decision for sometime, or we can move ahead to potentially buy back Google's stake at an appraised value, which would obviously be well below the value that was placed on at the time of the original investment."

Analysts have suggested, however, that with Google and AOL set to renegotiate their ads deal, the web giant is looking to leverage its stake to force Time Warner into offering a better deal.