When Jeff Bewkes woke up to news of AOL’s sale to Verizon on Tuesday, he felt vindicated.
The Time Warner chief executive spun AOL out as an independent company five years ago as part of a streamlining process that also included spinning off Time Warner Cable and Time Inc, its publishing unit.
Now that Verizon has agreed to pay $4.4bn for AOL, Mr Bewkes told the FT the deal “validates what we thought”.
At the time, he was convinced AOL was worth more as an autonomous entity. “It’s now, mark to market, more than twice the value than when we spun it out,” he said.
“Numerous analysts valued AOL at less than $2bn before we spun it out,” he said. “Some had it at zero.”
But in its half decade as an independent company, AOL sold $1.1bn of patents to Microsoft and then, this week, struck a deal with Verizon.
“It was separated in an effective way with no tax paid and [Time Warner] shareholders were able to continue to own it,” Mr Bewkes said.
Shares in Time Warner have risen sharply since it let go of AOL and Time Warner Cable in 2009. Shares in the two spun-out entities have also increased: AOL shares are up 109 per cent since it first left Time Warner, while Time Warner Cable shares have risen by close to 600 per cent.
The separations also made Time Warner itself a more affordable proposition for prospective suitors. Last year it received an unsolicited $71bn bid from Rupert Murdoch’s 21st Century Fox, which it rejected.
“We understood that we might be a target but we weren’t aiming to be taken over,” Mr Bewkes said. Though Time Warner shares fell after the rejection, the price has since returned to levels around Fox’s $85 offer price.
The streamlining of Time Warner appears to suggest that Mr Bewkes lost faith in the idea of a “big media” conglomerate. However, he said there was still a place for large, integrated media companies.
“What is big media — is it a conglomerate structure or scale of operations?” he said. The Time Warner of 2015 has a market capitalisation of $70bn and continues to own HBO, CNN, the Warner Brothers film studio and Turner portfolio of cable networks.
“We’re as big as they come in television series and movie production,” he said. “Big media is not over . . . it’s just more focused. The answer is to be very focused and have optimal scale in the activities you’re pursuing.”
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