Google Demands Time Warner Buy Back AOL Stake (GOOG)

Time Warner says Google has exercised its right to force Time Warner to buy Google’s AOL stake back or take AOL public.  Time Warner is “evaluating its options.”

What does this mean?

In December 2005, when Google agreed to invest $1 billion for 5% of AOL, it received the right to force Time Warner to conduct an AOL IPO or buy AOL’s stake back at “fair market value” as of July 1, 2008. That was six months ago.  Now Google wants its money.  (More details on this provision of the investment here).

What does this REALLY mean? It might just be a ploy in the renegotiation of the AOL-Google search deal.  AOL cuts Google a sweeter revenue share, Google backs off. Etc. (Several readers and Peter Kafka are thinking along the same lines)

In any event, Google just wrote off a huge chunk of AOL’s value ($726 million), and AOL’s “fair market value” has probably fallen to $5 billion or so.  5% of $5 billion is $250 million.  So, essentially what Google has just demanded is a check for $250 million.

Time Warner’s other option is to take AOL public, but it’s hard to imagine it would find much of a market for it, especially with Google dumping its stake on the deal.  So the most likely option here is sending a check.

See Also: Time Warner Conference Call LIVE

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