AOL to Buy Bertelsmann’s Stake in Venture

America Online Inc. said Friday that it will buy Bertelsmann’s half of AOL Europe to gain control of Europe’s second-biggest subscription Internet service.

Bertelsmann said it will sell its stake in AOL Europe and AOL Australia for as much as $8.25 billion to gain cash for expansion. AOL, the world’s largest Internet access service, will pay the world’s No. 3 media company between $6.75 billion and $8.25 billion in stock or cash after Jan. 31, 2002.

Bertelsmann said it’s selling its stake in the joint venture because it has decided to stick to media and content rather than selling Internet access, and it wants the money to start or buy other online ventures. Still, many analysts suspect Bertelsmann wanted to sell out because AOL is buying a chief Bertelsmann rival, Time Warner Inc.

“Bertelsmann and Time Warner in Europe compete head to head and it doesn’t make sense for AOL to own Time Warner and yet partner with a major competitor,” said Youssef Squali, an ING Barings analyst.

AOL and Bertelsmann also reached a four-year agreement in which the German company will be a “preferred” media provider for AOL’s 23 million subscribers worldwide.

AOL will be able to be more flexible in its European and Australian businesses, CEO Steve Case said in a conference call.

Though analysts said the move came largely so AOL won’t be cooperating with a chief rival after it buys Time Warner, both companies denied this.

On the New York Stock Exchange, AOL rose $2.75 to close at $64.75, while Time Warner rose $5.44 to close at $91.94.

Bertelsmann needs to expand to remain competitive as AOL pursues its $153-billion acquisition of Time Warner.

While Bertelsmann is the world’s largest publisher of English-language books, it’s fourth in music. Through a link with EMI Group, Time Warner is now the No. 1 music company.