AFP - Time Warner announced on Thursday that its board had approved a plan to spin off troubled Web unit AOL before the end of the year, bringing an end to one of the most disastrous corporate mergers ever.
Time Warner, in a statement, said AOL would become an independent, publicly traded company following a complete legal and structural separation from the US media and entertainment giant.
"We believe that a separation will be the best outcome for both Time Warner and AOL," Time Warner chairman and chief executive Jeff Bewkes said.
"We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company."
Time Warner said that before the separation goes ahead it will purchase the five percent stake in AOL owned by Internet search and advertising giant Google. Time Warner owns the other 95 percent.
Time Warner said that once the proposed separation is complete, Time Warner shareholders will own all of the outstanding interests in AOL.
It said it aims to complete the separation around the end of the year.
"This will be a great opportunity for AOL, our employees and our partners," said AOL chairman and chief executive Tim Armstrong, a former top Google executive recently brought on board to run AOL.
"Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options," Armstrong said.
Time Warner bought then-America Online in 2001, at the height of the dot.com bubble, in a deal which valued AOL at 165 billion dollars at the time.
The move proved disastrous, however, and Time Warner was forced in 2002 to massively write down the value of AOL, which has continued to rack up losses and lose subscribers.
AOL is currently the number four gateway to the web after Google, MSN and Yahoo! and has been trying to refashion itself recently as a popular one-stop portal.