AOL to buy Bertelsmann's stake in subsidiaries

America Online (AOL) has confirmed that it will buy media giant Bertelsmann's stake in AOL Europe and AOL Australia.

Under the option-structured deal, Bertelsmann will receive between $6.8bn and $8.3bn for its 50 per cent stake in the portals after 31 January 2002.

Payment will be made in either cash or stock, at AOL's discretion. Under the terms of the deal, however, AOL will take immediate ownership of Bertelsmann's stake in AOL Australia.

Bertelsmann's exit from AOL came as no surprise. Analysts have been predicting the move since January when AOL announced plans to acquire Bertelsmann's rival, Time Warner.

Bertelsmann said it would use the resources from the deal to build its existing ecommerce business, and provide seed money for new ecommerce and content activities. The company has also made no secret of the fact that it is on the acquisition trail.

AOL said the deal will speed up its growth by giving it twice as many online members outside the US than inside by 2004. The service provider predicts that its European customer base will quadruple during the period to 125 million.

Bertelsmann has also entered into a four-year alliance with AOL to become the preferred provider of media content and ecommerce to the 23 million members of AOL's interactive services.

As part of the $250m deal, Bertelsmann's entertainment properties - its music, magazine and book clubs - and its ecommerce sites will be featured on AOL, Compuserve and Netscape Online interactive services worldwide, as well as on AOL Instant Messenger, ICQ, AOL.COM, Digital City, Spinner and Winamp.

Bertelsmann and AOL will also cross-promote each other's brands, and Bertelsmann will provide broadband distribution for AOL and the provider's European brands.

AOL Europe is Europe's second largest internet provider with about 3.8 million members. Market leader T-Online, which is a division of Deutsche Telekom, has some five million users.