AOL this morning announced a deal to sell more than 800 of its patents and their applications to Microsoft for $1.056 billion in cash.
Following the sale, AOL said it would retain a license on the patents being sold to Microsoft, and that it would continue to own a “significant patent portfolio” of more than 300 patents and applications covering “core and strategic technologies,” including advertising, search, content, social networking, mapping, multimedia, streaming and security.
The patent sale to Microsoft includes the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be “immaterial.”
AOL said it also expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20% of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.
AOL said it intends to return “a significant portion” of the proceeds from the sale to shareholders, but is still deciding the most “efficient and effective” method for that. AOL calculated that pro forma results for the sale and license would net about $15 per share of cash on hand.
“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio,” stated AOL Chairman-CEO Tim Armstrong, adding that the deal “enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.”