AOL $1 Billion Patent Sale To Microsoft

announced today that they have entered into a definitive contract with Microsoft Corporation to sell more than 800 patents and relative patent applications to Microsoft (MSFT) in addition to granting Microsoft a non-exclusive license to the patents which they retain for an accumulative $1.056 billion in cold hard cash.

Tim Armstrong, AOL’s Chairman and CEO was quoted by Business Wire having said:

“The agreement with Microsoft represents the culmination of a robust auction process for our patent portfolio. We continue to hold a valuable patent portfolio as highlighted by the license we entered into with Microsoft. The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value.”

Goldman Sachs and Evercore Partners served financial advisory roles in regards to the transaction which is expected to be completed by the end of 2012.

Microsoft General Counsel and Executive VP of Legal and Corporate Affairs Brad Smith was quoted having said:

“This is a valuable portfolio that we have been following for years and analyzing in detail for several months. AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio.”

AOL expects the sale of an AOL subsidiary, as part of the patent sale, to record as a capital loss which should prove to beneficial to the company from a tax perspective as they will utilize existing and new deferred tax assets in order to offset any normal income taxes which would come as a result of their remaining patents.

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