AOL May Break Apart Its Core Businesses to Merge With Other Companies
December 6, 2010
(Chattah Box U.S. News)—AOL executives are said to be considering splitting its dial-up service and its display advertising business so those companies could be spun off to willing investors, Reuters reports. Sources indicate that AOL would like to shop its display advertising and content division to Yahoo, while it would consider offering its dial-up service to a company such as Earthlink.
AOL considered a similar spinoff several years ago but did not go through with it, and since then, Earthlink spent $516 million buying DeltaCom, Inc., which makes it unlikely that Earthlink would make another mammoth investment in the near-term. AOL’s dial-up business is projected to contribute over $1 billion of AOL’s total $2.4 billion revenue in 2010, Reuters notes.
The separate businesses will be spun off rather than undergoing an outright sale to alleviate tax issues, a source said. If Yahoo were to participate in the AOL transaction, Yahoo shareholders may have to deal with 38 percent in taxes on the transaction price, Reuters reports.