Google to hold AOL stake in new company

Google will hold its $1 billion AOL stake in a new limited liability company it plans to create, and has the right to take that company public after mid-2008.

Google Inc. will create a limited liability company that will own the US$1 billion 5 percent equity interest the search engine giant will acquire in Time Warner Inc.'s America Online Inc. subsidiary.

Moreover, as of July 1, 2008, this new company, which Google calls HoldCo, will be able to register for an initial public offering (IPO), according to a document Google filed with the U.S. Securities and Exchange Commission this week.

"If we exercise this right, Time Warner will have the right to purchase our interests for cash or shares of Time Warner stock based on an appraised fair market value of our equity interest in HoldCo in lieu of conducting an initial public offering," the document reads.

The document also provides other details about the much ballyhooed agreement, which was announced on Tuesday:

-- Google and AOL expect to finalize all of the agreement's points and transactions in the first calendar quarter of 2006, and to resort to a "binding expedited arbitration procedure" to resolve any disagreements that may arise.

-- The terms of the agreement run for five years, including AOL's continued use of Google's engine for general Web searches and AOL's continued distribution of Google paid search ads.

-- The agreement to establish interoperability between AOL's AIM instant message (IM) service and the Google Talk IM service will require that Google Talk users register their user names with AIM to access that network.

Meanwhile, on Thursday, Marissa Mayer, Google's vice president of search products and user experience, posted an item on the company's official blog to dispel what she terms "rumors and misconceptions" about the AOL deal, including the contention that Google will give preferential treatment in its organic search results to AOL Web pages.

"Biased results? No way. Providing great search is the core of what we do. Business partnerships will never compromise the integrity or objectivity of our search results. If a partner's page ranks high, it's because they have a good answer to your search, not because of their business relationship with us," she wrote.

Regarding the agreement to expand display advertising throughout the Google network, and the resulting concern that the famously sparse Google.com will become cluttered, Mayer wrote: "There will be no banner ads on the Google home page or Web search results pages. There will not be crazy, flashy, graphical doodads flying and popping up all over the Google site. Ever."

Her full posting can be found here: http://googleblog.blogspot.com/2005/12/about-aol-announcement.html

To access the SEC document go to: http://www.sec.gov/Archives/edgar/data/1288776/000119312505248134/0001193125-05-248134-index.htm

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