Liberty Media (LINTA) chairman John Malone says his company has been in “limited discussions” to swap its Time Warner (TWX) stake in exchange for AOL’s dialup Internet access business, the FT’s Ken Li reports.
As we noted in August, there are obvious advantages for both sides: Liberty gets a cash-generating (though shrinking) telecom business; AOL gets rid of its dialup albatross as it focuses on its media and advertising business (or selling itself to Yahoo). And as Liberty CEO Greg Maffei noted in August, the deal could be ‘tax-efficient’. Of course it is! John Malone avoids taxes like the plague, so he will never, ever, ever do a deal that doesn’t minimize them or negate them altogether.
Some downsides: Tax-efficient as a deal might be, owning a dialup business does absolutely nothing for Liberty’s existing portfolio, and there are zero synergy possibilities. From Time Warner’s perspective, selling dialup separately from the remainder of AOL will make it that much harder to dump the property in Microsoft or Yahoo’s lap. If either MSFT or YHOO buy both businesses, they can at least argue that the money that dialup throws is helping them foot the bill for the Web business. Strip that out, and the prospective purchase price shrivels up. (Though Li says Yahoo might not want AOL’s dialup business.)
And to repeat ourselves, a Liberty-AOL deal doesn’t move along much-needed consolidation in the dialup business. That would require a rollup of sorts with someone like EarthLink (ELNK), which is rid itself of money-losing investments and is currently operating a nice little cash-generating machine; United Online (UNTD); or Microsoft’s MSN dialup business.
Business Insider Emails & Alerts
Site highlights each day to your inbox.