Time Warner announced the terms of the AOL spinoff.
Based on the the current Time Warner share price and the registration statement filed with the SEC today, the implied valuation of AOL is about $3.2 billion.
This is significantly below most recent estimates of the company’s value.
In the spinoff, each Time Warner shareholder will get 1 share of AOL for every 11 shares of Time Warner.
According to the SEC filing, the pro forma (as adjusted) standalone AOL will have $100 million of cash and about $72 million of debt. AOL shareholders, therefore, will be getting net cash of about $25 million from Time Warner along with the company (immaterial).
Today, Time Warner’s stock closed at $32, giving Time Warner an equity market cap of $38 billion. One-twelfth of that equity market cap is about $3.2 billion.*
Most recent estimates put AOL’s value at about $4-$5 billion.
If memory serves, just before the AOL-Time Warner merger was announced, AOL’s valuation was closing in on $200 billion.
See Also: AOL Spinoff Coming December 9
* At today’s close, the combined AOL-Time Warner stock was worth $38 billion. Time Warner will issue 1 share of AOL for every 11 shares of the combined company. The current Time Warner value, therefore, will be divided into 12 parts, of which Time Warner is worth 11 ($34.8 billion) and AOL is worth 1 ($3.2 billion).
(Alas, when we first did the maths, we made the boneheaded mistake of just dividing the $38 billion by 11).