Monday, August 4, 2008
Time Warner Putting AOL On Bidding Block
WSJ report says that Time Warner has wrapped up the spade work necessary for seperating AOL's dial-up business from the content and advertising side, and they're now seriously following up on talks to sell off AOL in bits and pieces. Article goes on to add that discussions with Yahoo are 'ongoing' for the ad-based business and Earthlink is a solid contender for the dial-up side.
Discussions with Yahoo, the more advanced of the two, envision Yahoo's folding in AOL, with Time Warner getting a minority stake in the combination, the people said. The Yahoo discussions have valued AOL at around $10 billion, excluding the dial-up business. In contrast, Time Warner's current stock price -- around $14 -- suggests a value of no more than $3 billion to $4 billion for the ad-sales and content businesses, some analysts say. - Time Warner Is Ready To Deal AOL Components, Merissa Marr, Wall Street Journal, August 4 2008; Page B4
And it gets even more complicated. Time Warner on Friday blocked the nomination of Jonathan Miller, the former chairman and chief executive of its AOL Internet unit, to the Yahoo Board. Miller was not one of the board nominees on the Icahn slate, but his name was supposedly suggested by Yang, and he was considered a shoo-in for one of the two Board seats agreed upon between Icahn and Yahoo.
New York Times report says that Time Warner said Mr. Miller had signed an agreement with Time Warner not to work for any of its competitors, including Yahoo, until March 2009. Mr. Miller, who is a partner at Velocity Interactive Group, an investment company, was pushed out of AOL in 2006, and his relationship with some AOL executives has been strained since then.
So if his relationship with AOL was strained, and if he had been appointed to the Yahoo board, then he would have found himself at the negotiating table across from Time Warner. Which would have been problematic and unhelpful for finalising the deal, and for working with AOL after/if the deal actually happens. So blocking his nomination to the Yahoo Board would be a smart move, and an indicator that Time Warner and Jeffrey Bewkes are serious about bringing Yahoo into talks for AOL.
Good pipedream for Time Warner, but how about looking at it from Yahoo's viewpoint? More correctly, let's look at it from the viewpoint of a Yahoo shareholder. What happens if it doesn't work out, and the investment goes down the tube? What will it do to Yahoo's value? And is Yahoo in any condition to pull off something like this? They can't even handle their own house. What makes them think they can manage the combined Yahoo-AOL behemoth? Does anyone even remember how much hoopla there was when Time Warner came together with AOL? It was billed as one of the greatest mergers in history. And then the dot com bubble burst...
And the inflated $10 billion price previously bandied by Yahoo was actually a desperate attempt to come up with an alternative. Looking at it objectively now, with Microsoft vanquished, even a deluded control freak CEO like Jerry Yang will have to admit that diluting Yahoo's value with $10 billion worth of AOL's business minus the dial-up side is way too much. So maybe he could make a new offer, with a much reduced stake for Time Warner in the new entity. This is getting too friggin ironic, actually. I mean, it was just the other day that Yang was at the receiving end of successive offers which kept going down instead of up.
And worse yet - Microsoft is also a contender to buy AOL. Do we really want to go down this road again, with Yang and Ballmer on opposite sides of a takeover deal?
Discussions with Yahoo, the more advanced of the two, envision Yahoo's folding in AOL, with Time Warner getting a minority stake in the combination, the people said. The Yahoo discussions have valued AOL at around $10 billion, excluding the dial-up business. In contrast, Time Warner's current stock price -- around $14 -- suggests a value of no more than $3 billion to $4 billion for the ad-sales and content businesses, some analysts say. - Time Warner Is Ready To Deal AOL Components, Merissa Marr, Wall Street Journal, August 4 2008; Page B4
And it gets even more complicated. Time Warner on Friday blocked the nomination of Jonathan Miller, the former chairman and chief executive of its AOL Internet unit, to the Yahoo Board. Miller was not one of the board nominees on the Icahn slate, but his name was supposedly suggested by Yang, and he was considered a shoo-in for one of the two Board seats agreed upon between Icahn and Yahoo.
New York Times report says that Time Warner said Mr. Miller had signed an agreement with Time Warner not to work for any of its competitors, including Yahoo, until March 2009. Mr. Miller, who is a partner at Velocity Interactive Group, an investment company, was pushed out of AOL in 2006, and his relationship with some AOL executives has been strained since then.
So if his relationship with AOL was strained, and if he had been appointed to the Yahoo board, then he would have found himself at the negotiating table across from Time Warner. Which would have been problematic and unhelpful for finalising the deal, and for working with AOL after/if the deal actually happens. So blocking his nomination to the Yahoo Board would be a smart move, and an indicator that Time Warner and Jeffrey Bewkes are serious about bringing Yahoo into talks for AOL.
Good pipedream for Time Warner, but how about looking at it from Yahoo's viewpoint? More correctly, let's look at it from the viewpoint of a Yahoo shareholder. What happens if it doesn't work out, and the investment goes down the tube? What will it do to Yahoo's value? And is Yahoo in any condition to pull off something like this? They can't even handle their own house. What makes them think they can manage the combined Yahoo-AOL behemoth? Does anyone even remember how much hoopla there was when Time Warner came together with AOL? It was billed as one of the greatest mergers in history. And then the dot com bubble burst...
And the inflated $10 billion price previously bandied by Yahoo was actually a desperate attempt to come up with an alternative. Looking at it objectively now, with Microsoft vanquished, even a deluded control freak CEO like Jerry Yang will have to admit that diluting Yahoo's value with $10 billion worth of AOL's business minus the dial-up side is way too much. So maybe he could make a new offer, with a much reduced stake for Time Warner in the new entity. This is getting too friggin ironic, actually. I mean, it was just the other day that Yang was at the receiving end of successive offers which kept going down instead of up.
And worse yet - Microsoft is also a contender to buy AOL. Do we really want to go down this road again, with Yang and Ballmer on opposite sides of a takeover deal?
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