AOL Inc. (NYSE: AOL) announced today its final steps in returning
approximately $1.1 billion to AOL shareholders in 2012, entering into a
$600 million fixed-dollar collared accelerated stock repurchase agreement with Barclays Bank PLC and
announcing its authorization of a $5.15 per share special cash dividend.
"Today's announcement underscores AOL's commitment to delivering value
for our shareholders," said AOL Chairman and CEO Tim Armstrong. "AOL
remains committed to creating and unlocking value for all shareholders
through smart execution and disciplined management of our asset
portfolio."
AOL has agreed to repurchase $600 million worth of common stock under
the ASR Agreement, utilizing the share repurchase authorization
previously approved and an incremental $10 million authorized by the
Company on August 26. AOL will pay the $600 million at the beginning of
the ASR Agreement and expects to receive shares throughout the remainder
of the year and a substantial majority of the shares underlying the
transaction before year-end, including approximately 4 million shares
that Barclays will deliver to AOL on August 30. The specific number of
shares AOL will ultimately repurchase under the ASR Agreement will be
based on a discount to the volume-weighted average share price of AOL
common stock during the agreement period adjusted down by $5.15 for the
payment of the special dividend. The purchase price will also be subject
to floor and cap provisions establishing a minimum and maximum number of
repurchased shares.
Additionally, the Company authorized a special, one-time, cash dividend
of $5.15 per share, payable on December 14, 2012 to shareholders of
record at the close of business on December 5, 2012. Our estimated
shares outstanding on December 5, 2012 for the purposes of calculating
the dividend per share amount represents our estimate of the number of
shares outstanding on that date plus all unvested employee restricted
stock unit awards ("RSUs") and performance stock unit awards ("PSUs").
For purposes of calculating the dividend per share, the shares that
Barclays will deliver to AOL prior to the ex-dividend date on November
30, 2012 are included in the calculation even though for accounting
purposes they will be excluded from our weighted average number of
shares outstanding. This is due to the fact that Barclays will receive
approximately $54 million, representing the present value of the
dividend attributable to those shares at the beginning of the ASR
Agreement. AOL expects to announce the anticipated treatment of the
dividend for tax purposes prior to the ex-dividend date.
"Since becoming a public company in December 2009, we have demonstrated
an ability to both unlock and prudently manage our valuable asset
portfolio, including our tax assets," said Artie Minsion, AOL chief operating officer
and acting chief financial officer. "Today we have done
both again, outlining a clear path to returning $1.1 billion in cash to
shareholders, while putting in place a necessary mechanism to ensure the
preservation of our valuable tax assets."
As a result, due to our desire to preserve our large domestic tax
attributes which could be significantly impaired should a "change of
control" be triggered under Section 382 of the Internal Revenue Code of
1986, as amended, the Company has adopted a Tax Asset Protection Plan
intended to act as a deterrent to any individual, individual fund or
family of funds with common dispositive power acquiring 4.9% or more of
the Company's outstanding shares without the approval of the Company's
Board of Directors. As of June 30, 2012, AOL had several domestic tax
attributes, including net operating losses of approximately $130 million
after-tax which expire over a period ranging from five to twenty years,
and capital loss carry-forwards, of approximately $500 million
after-tax, which expire over a period ranging from three to five years.
Unless otherwise restricted, AOL can utilize these tax attributes in
certain circumstances to offset future U.S. taxable income, including in
connection with capital gains that may be generated from a potential
asset sale. AOL believes the implementation of the Tax Asset Protection
Plan will serve the interests of all shareholders given the size of its
domestic tax assets and the potential damage that could occur should a
change of control occur. This plan is similar to other arrangements
adopted by many other public companies with significant tax attributes.
The rights will expire on August 27, 2015, or such earlier time as the
Company's Board of Directors determines that the Company has no
remaining designated tax attributes as of the beginning of a taxable
year. The Company also intends to submit the Tax Asset Protection Plan
for stockholder approval at its next annual meeting of stockholders.
In connection with the payment of the special cash dividend and in
accordance with and pursuant to the AOL Inc. 2010 Stock Incentive Plan,
as amended and restated, the Company will make an equitableadjustment
to outstandingstock options, such that the fair value of employee
awards immediately following the dividend will be unchanged from the
fair value prior to the dividend. In addition, individuals who hold RSUs
and PSUs will be paid out the special dividend as the respective RSUs
and PSUs vest. The Company does not expect to record any material
incremental compensation expense in connection with the adjustment of
stock options or payment of dividends on RSUs and PSUs.
Additional information regarding the Tax Asset Protection Plan, the ASR
Agreement and the special cash dividend will be set forth in a Current
Report on Form 8-K that the Company is filing with the Securities and
Exchange Commission.
