AOL 'mulls break up, then merger with Yahoo'

06/12/2010

AOL is actively exploring a breakup involving a complicated series of transactions that may lead to a merger with Yahoo, according to a news report. AOL is actively exploring a breakup involving a complicated series of transactions that may lead to a merger with Yahoo, according to a news report.

Sources familiar with the deal told Reuters that the plans are still in the exploratory stage and Yahoo has not been contacted. The sources declined to be named because they were not authorized to speak to the media.

06/12/2010

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AOL has continued to explore a break up option since its December 2009 spin off from media giant Time Warner. “You can drive the pieces into people’s hands that could pay top dollar for them and create value, or spin them off,” said one of the sources.

This strategy is dependant on the buyers for the parts, including Yahoo and EarthLink, whose directions have changed since Time Warner first considered these plans, said the sources.

Yahoo, which is expected to generate $1.64-billion in earnings before interest, taxes, depreciation and amortization (EBITDA) this year, could support AOL’s display ad business, giving AOL the confidence to shed the dial up division, a big financial engine at the company.

AOL and Yahoo have so far declined to commment on the story.

Read the Reuters report here.

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