Google’s deal with AOL allows for an IPO

Google’s deal with AOL allows for an IPO

Earlier this week search engine giant Google edged the software giant Microsoft in managing to strike much in news deal with the Time Warner’s AOL division. Google purchased a 5% stake in the internet division of Time Warner group for a reported USD 1 billion. Market experts believe this to be a high price for a share in the company struggling to maintain their user base in their primary business as an ISP in the US market.

However, one interesting factor in this high-publicized deal is the fact that it includes an option for Google to sell the investment in a public offering in July 2008. This means that Time Warner can purchase their stake back or release an IPO of America Online in the market. Google released this information while filing the reports with the U.S. Securities and Exchange Commission.

The filing said that in lieu of a public offering, Time Warner would be required to pay an appraised fair market value for their stake. This means that the owners of AOL are counting on the fact that their improved deal with Google would help them improve their position in the internet advertisement market and gain more revenue avenues. Time Warner on their part is not aiming to release an IPO offering of their AOL division.

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