Sometime in 2005, Google took a $1 billion to 5 percent stake in AOL. This put AOL’s owner, Time Warner into a $20 billion unit value. But now, realizing that it is probably not gaining grounds from its investment, Google is demanding AOL to buy back its investment to their company at a reduced value of $726 million. This would reduce AOL’s unit valuation to only $5.5 million.
With the declining value of AOL, it is but practical for a company with a big stake such as Google to want what’s left of its money back.
According to Time Warner, Google has already notified them of its plan to “demand registration rights” to force Time Warner in buying back Google’s share in AOL. If Time Warner would not be able to give what Google is demanding, Time Warner will have no choice but to make AOL public.
Acknowledging that it indeed requested for an investment buy-back deal, Google issued the following statement:
“AOL remains an extremely valued partner, and we’ll continue to work closely together to provide their users with the best search experience possible. After careful consideration, we made the decision that we needed to exercise our rights now so we could be in a position to sell our interest when the timing made sense for us.”
Of course with big decisions such as this one, it is inevitable that speculations should come out. Whether Google just wants a renegotiation with Time Warner that would make them run AOL’s search business, or it just wants to preempt the rumored talks of Microsoft buying AOL’s search business, the fact still remains that Google has every right to demand back what is has invested in AOL, especially sinceits investment is not giving them a much needed revenue.
