AOL Inc. (AOL) shareholder Starboard Value LP urged the board to reduce tax liability by hiring a financial adviser on any possible sale or breakup of business assets or units.
Patents and legacy dial-up businesses at AOL “could generate substantial tax liability” in any sale, Starboard Chief Executive Officer Jeff Smith said in a letter to AOL’s board, according to regulatory filing today. Selling off content assets, such as MapQuest, which AOL purchased for $1.1 billion in 1999, might bring a favorable tax outcome because of tax-loss carryforwards, Smith wrote.
AOL, the Internet-services provider based in New York, has hired Evercore Partners Inc. (EVR) to explore strategic options and find a buyer for its more than 800 patents. Starboard, which owns a 5.2 percent stake in AOL, suggested that the board consider the possible benefit of selling content assets in tandem with any sale of its patents or dial-up businesses.
“In evaluating these strategic options, it is critical that the Board carefully plan and properly assess any asset sale or divestiture to ensure the most tax-efficient outcome,” Smith wrote in the letter.
The company is “continuing to work on the comeback of AOL,” Caroline Campbell, a spokeswoman for AOL, said in an e- mailed statement in response to the letter.
“We believe strongly that all of our brands are important to our brand portfolio,” she said. “We will continue to update investors as we execute on our plan.”
While Starboard has said the patents may yield more than $1 billion in licensing income, M-Cam Inc., a patent advisory company, values those assets at about $290 million.
AOL, led by CEO Tim Armstrong, posted declining sales for each quarter last year. The company’s revenue for the first quarter this year is estimated to drop 4.6 percent to $526.1 million, according to analysts’ figures compiled by Bloomberg.
AOL fell 1.7 percent to $18.97 at the close in New York. The shares have climbed 26 percent this year.
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