Google seals $1bn AOL deal

Google said on Wednesday that it has ironed out the final details of its expanded alliance with America Online (AOL), clearing the way for the online search-engine leader to invest $1-billion in its biggest advertising partner.

The two companies signed a March 24 definitive agreement to seal a deal originally announced in December, according to Securities and Exchange Commission (SEC) documents filed by Google.

The California-based company will assume a 5% stake in Time Warner’s AOL in exchange for a $1-billion investment expected to be made some time during the three months ending in June.

AOL also will get a $300-million credit to advertise its products and services through Google’s vast advertising network. Google, in turn, is depending on AOL to sell more graphical ads to help diversify its search engine beyond the text-based ads that generate most of the company’s profits.

The deal also gives Google the right to demand that AOL be spun off as a publicly traded company beginning in mid-2008, according to previously filed SEC documents.

Google’s investment in AOL rebuffed a rival bid by Microsoft, which has been trying to build a formidable advertising network of its own.

AOL has been Google’s biggest advertising partner for several years. In 2005, AOL accounted for $550-million, or 9%, of Google’s total revenue.

Google’s shares surged $17,21, or 4,6%, to $394,41 in late-afternoon trading on the Nasdaq Stock Market. The company’s stock price has climbed by 15% during the past four trading sessions as money managers adjust their investment portfolios to account for Google’s inclusion in the bellwether Standard & Poor’s 500 index after the markets close on Friday.

Time Warner shares rose nine cents to $16,83 on the New York Stock Exchange. — Sapa-AP

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