Liberty’s Malone in talks over AOL division

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John Malone has begun talks about swapping his stake in Time Warner for the internet access operation of AOL, the media group’s internet services division, the Liberty Media chairman said on Friday.

“There have been limited discussions,” Mr Malone told the Financial Times on the sidelines of an investor presentation in New York. He emphasised, however: “Time Warner still needs to divide the business.”

Jeff Bewkes, Time Warner’s chief executive, said last month the group had completed preliminary preparations to split off AOL’s dial-up business, which is seeing subscriptions dwindle, from its online content, communications and advertising activities.

However, Time Warner is not expected to separate the two parts of the business until early in 2009.

Liberty’s 103m shares in Time Warner were worth just over $1.42bn on Friday, slightly below analysts’ estimates of the value of AOL’s access operation.

News of the tentative talks comes in the week that Yahoo’s board authorised its executives to launch a new round of discussions with AOL about a possible combination of the two internet businesses, after earlier talks stalled.

One scenario, according to sources familiar with the companies, would be a merger of Yahoo and AOL, with Time Warner holding a stake, but Yahoo is not expected to want to keep the access business.

Resolving the future of AOL is Time Warner’s main goal, Mr Bewkes told the FT earlier this month. Greg Maffei, Liberty’s chief executive, said in August he expected Time Warner would talk to Liberty “because of our ability to do a tax-efficient transaction for both parties”.

The talks could develop into a competitive auction, as analysts originally expected EarthLink to be the most likely bidder for AOL’s dial-up business.

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