Google, AOL Complete Deal to Expand Alliance

Google Inc. said Wednesday that it had ironed out the final details of its expanded alliance with America Online, clearing the way for the online search-engine leader to invest $1 billion in its biggest advertising partner.

The two companies signed a definitive agreement Friday to seal a deal originally announced in December, according to Securities and Exchange Commission documents filed by Google.

The Mountain View, Calif.-based company will assume a 5% stake in Time Warner Inc.’s AOL in exchange for a $1-billion investment expected to be made some time during the three months ending in June.

Time Warner shares rose 5 cents to $16.79. Google’s shares surged $17.78 to $394.98, but fell to $383 in after-hours trading after Google’s announcement that it would sell an additional 5.3 million shares of its stock to finance its expansion plans.

AOL also will get a $300-million credit to advertise its products through Google’s vast advertising network. Google, in turn, is depending on AOL to sell more graphical ads to help diversify its search engine beyond the text-based ads that generate most of the company’s profit.

The deal also gives Google the right to demand that AOL be spun off as a publicly traded company beginning in mid-2008, according to previously filed SEC documents.