AOL Inc. shared in a statement that it intends to raise as much as $345 million by selling convertible notes. The sale is supposed to provide funds that could be used by the company to proceed with the planned expansion in the advertising market through some future acquisitions.
The offering marks the first time the U.S.-based company issues bonds since its spin-off from Time Warner five years ago. Most of the cash AOL Inc. has recently relied on was generated from asset sales and its internal operations, whose goal was to provide enough money for the companys growth.
According to AOL Inc.s statement, $50 million of the proceeds will be used by the company to buy back shares from the note acquirers. This step is considered a part from the companys previously announced repurchase program that amounts to $150 million.
The proceeds gathered after the convertible notes sale will be used to provide money for hedge and warrant transactions in order to cover the shares of the AOL Inc. underlying the notes. The money are also said to be used to fund takeovers, other transactions or additional stock buybacks.
As reported by the Wall Street Journal, AOL Inc. said in its statement that the “remainder of the net proceeds” would be used for “general corporate purposes, which may include share repurchases, acquisitions or other strategic transactions”.
The funding is estimated at about one tenth of the companys market value. In addition, the bond offering comes after AOL Inc.s took some measures to arrange a five-year credit facility in 2013. Recently, the company has been increasingly relying on automatic advertising-sales technology, which facilitates Web publishers when selling ads.
Despite this business segment has normally been controlled by large companies such as Google Inc., the executives of AOL Inc. believe there will be consolidation among the advertising technology companies over the next year and a half.
AOL Inc. was 1.72% down to close at $42.33 per share yesterday, marking a one-year change of +13.15%. According to the information published on CNN Money, the 21 analysts offering 12-month price forecasts for AOL Inc. have a median target of $48.00, with a high estimate of $70.00 and a low estimate of $37.00. The median estimate represents a +13.39% increase from the last price of $42.33.