Media and Internet giant AOL Time Warner is set to announce that it will pay cash to buy out Bertelsmann's $6.75 billion stake in AOL Europe, sources close to the companies said.
AOL Time Warner had been expected to detail how it planned to pay for the 49.5 per cent stake in Internet service provider AOL Europe that it does not already own at a conference call for investors and analysts tonight.
Sources close to the companies said AOL Time Warner, the world's biggest Internet and media group, had decided it could comfortably absorb a cash payment which it will pay in two tranches: $5.25 billion in January and $1.5 billion in July.
Bertelsmann recently exercised an option to sell its stake in AOL Europe for $6.75 billion. Under the deal, AOL Time Warner has to pay $2.5 billion of the total in cash but could chose whether to pay the remainder in cash or shares. Analysts had widely expected AOL Time Warner to chose a mix of both.
AOL Time Warner shares have fallen from a year high of $58.50 in June to $31.95 at the close on Friday after being hammered by a slump in advertising revenues and slower growth in its US Internet subscriber base. The September 11th attacks in the United States exacerbated the slowdown.