TW in Talks on AOL With Comcast, Google, Says Source
Time Warner, under investor pressure, is in preliminary talks with Comcast and Google about a possible partnership that could involve its AOL unit, a person familiar with the situation said. The companies are discussing what, if any, 3-way combination might make sense, the source said, adding that no term sheet for a transaction has been produced. The talks come amid speculation that Microsoft is interested in combining its MSN Internet business with AOL, the No. 1 U.S. dial-up Internet provider (CD Aug 16 p7).
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The negotiations may have been sparked by pressure from financier Carl Icahn for TW to sell assets and increase shareholder returns after its stock slumped following the AOL-Time Warner combination. This week, Icahn stepped up his criticism of Time Warner management, issuing an open letter to shareholders that said TW sold assets for less than their value (CD Oct 12 p3). “The perception among their shareholders has been that it has been undervalued,” said Jessica Zufolo, an analyst at Medley Global Advisors. “The Icahn activities [may be] geared around engaging around some full searching process for the company to reevaluate what the business plans are to respond to the concerns of shareholders that the stock price continues to be at an anemic level.” Talks among the 3 firms “could be viewed as one way to kick start that, to put it in overdrive,” she said.
Officials at Comcast and Time Warner declined to comment on a Wall Street Journal report late Wed. that Comcast and Google were in “serious discussions” about buying a stake in AOL. “Google and AOL have a healthy global partnership, and AOL remains a valued partner,” said a Google spokesman. He said the company had no comment on any transaction with Comcast and TW. Time Warner CEO Richard Parsons has said his top priority is to increase growth at AOL, which has been viewed by some investors as a drag on the company. Options include issuing stock in AOL, he told investors last month (CD Sept 22 p11). AOL may be attractive as a way to fuel broadband growth, one analyst said. “People see AOL as a bridge to broadband. All of those narrowband customers are eventually going to migrate up,” said Precursor CEO Scott Cleland. “That’s the interest of all these players… positioning for the migration over time.” - Jonathan Make