Internet pioneer America Online Inc (AOL), which merged with print media magnate Time Warner in January 2000, creating the world's largest media and online services company, today officially announced a return to its web roots.
AOL, which clinched the deal to merge Time Warner at the fag end of the dotcom bubble, will list itself as a separate internet-based company on the New York Stock Exchange on 10 December.
The AOL offer had, at the time of merger in January 2000, valued Time Warner at $164.75 billion, about double the company's $83 billion market capitalisation. When roughly $17.2 billion in Time Warner debt was added to the equity value, the $181.95 billion offer ranked as the most expensive buyout in corporate history. The merger then created a $350 billion media giant.
AOL, which had a market capitalisation of $147 billion, based on its inflated stock price at the time of its Warner acquisition, will now start trading at a market cap of $2.5 billion, based on the current value of its stock. Time Warner has a current market cap of around $37 billion.
The shareholders of AOL owned 55 per cent of the new company while Time Warner shareholders owned only 45 per cent, thus the smaller AOL bought out the far larger Time Warner.
After the merger, however, the profitability of the ISP division (America Online) decreased, resulting in a significant drop in the value of the America Online division. This forced a goodwill write-off, causing AOL Time Warner to report a loss of $99 billion in 2002 - at the time, the largest loss ever reported by a company.