Google Proposes IPO After Merger With AOL

Written by Administrator

Saturday, 24 December 2005

The new Google $1 billion investment in America Online might lead to an IPO in 2008, giving the online search engine leader and AOL parent company Time Warner, the opportunity to capitalize on an Internet advertising boom that they both are hoping to generate through their partnership. The probable timeline for initial public offering by AOL emerged in a Friday filing with the Securities and Exchange Commission. The documents provides additional details about a deal announced earlier this week that extends the business ties that Google and AOL formed when they began working together in 2002. Although Google only holds a 5 percent stake in AOL, it retains the right to demand an IPO beginning in July 2008, according to SEC documents. If Time Warner doesn't want to pursue an IPO, then it could buy back Google's stake based on a fair market appraised value, the filing states. Time Warner has been pressured from a group of shareholders led by investor Carl Icahn to lift its stock, which has fallen by 9 percent this year. Icahn did not want the deal with AOL to proceed. To help get the stock moving, AOL co-founder Steve Case said he had proposed a spin-off three months before his resignation from Time Warner's board of directors in October. Google has had much success since its own August 2004 IPO, creating investor hopes that it can help AOL become more valuable. Google's market value has gained value; from about $23 billion at the time of its IPO to $125 billion today. AOL was one of the biggest beneficiaries of Google's IPO. When the two companies became business partners in 2002, Google gave AOL stock warrants that were converted into 7.4 million shares - a stake that Time Warner sold for $1.1 billion. Under the new five-year deal announced Tuesday, AOL now has the right to use Google's search technology on its own and also will receive a $300 million credit to advertise its content and services through Google's huge marketing network. Google, in turn, is depending on AOL to sell more graphic-based ads to diversify the search engine past the text-based ads that generate most of its profits. Google also will be allowed to draw from AOL's huge video library, which could help increase traffic to its own Web site. AOL's leading instant messaging service, AIM, will become compatible with Google's new messaging service next year, but Google's users will have to register with AOL to gain access to the expanded network, according to Friday's filing. Google's shares fell $1.11 Friday, closing at $430.93 on the Nasdaq Stock Market. Time Warner's shares dropped 2 cents to close at $17.68. By Susan Evans Jump2Top.Com Search Engine Optimization Company

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