Tuesday, October 27, 2009
Time Warner recently filed an amendment to its Form-10 which includes and Information Statement describing the overall transaction. To accomplish the spin-off, Time Warner will, following the reorganization, distribute all of its equity interest AOL to Time Warner shareholders on a pro rata basis. After the spin-off, Time Warner will not own any equity interest in AOL and AOL, will be independent from Time Warner even though the population of shareholders will be the same. The spin-off transaction does not require a vote of Time Warner's shareholders.
The centerpiece of the spin-off transaction is the Separation and Distribution Agreement with AOL (exhibit 2.1). The effect of the Separation and Distribution Agreement (along with the ancillary agreements) will be to finally undo this "Deal from Hell". The Separation Agreement itself reads like an amicable divorce. Who gets what and who is responsible for what, when. Schedule II to the Agreement includes a list of assets that assigns them to either AOL or Time Warner. For example, Time Warner gets 11 AOL-related patents and AOL's Gulfstream jets.
Time Warner also gets to keep something like 500+ web addresses, all of which include some version of the AOL and Time Warner name, for example: america-online-time-warner.net, aolandtimewarner.com, and aolcnn.com. My favorite? I suppose it has to be aolfucktimewarner.com or maybe boycottaoltimewarner.com or even not-aol-time-warner.com. Time Warner also gets a list of Harry Potter-related websites.
The filing includes all of the ancillary agreements and provides a pretty good example of how, if you happen to be interested, one goes about structuring a spin-off. In addition to the Separation Agreement there is a Transition Services Agreement (tax audit, and general contracting/construction management), an IP Cross Licensing Agreement (you license all my IP, I license all your IP), a tax opinion (no taxable event pursuant to Sec.332 and 337), an Employee Matters Agreement (they're yours, deal with them), and a Search Services Agreement (you'll still do that for me, right?), among many others. The list of agreements is really pretty lengthy. Working one's way through these documents, particularly the employment contracts, feels a bit voyeuristic.
This deal looks set to close on or about November 12 of this year.