This week's investment agreement between Amazon.com (Nasdaq: AMZN) and AOL Time Warner (NYSE: AOL) reportedly contains language that "leaves the door open" for a possible merger, a merger-and-acquisition attorney told the E-Commerce Times on Wednesday.
According to published reports, the agreement -- which calls for AOL to invest $100 million in Amazon as part of a five-year alliance -- allows AOL to talk to Amazon directors about a possible buyout, as long as the discussions remain confidential.
Such a provision normally is not part of a contract, said Michael Goldman, a merger-and-acquisition attorney at Wilmington, Delaware law firm Potter Anderson & Corroon. Goldman was familiar with reports of the contract language, though he said he had not seen a copy of the agreement, which was filed Monday with the U.S. Securities and Exchange Commission.
"The question is, why did they put that in there?" Goldman said.
Drawing Closer
Amazon and AOL announced the new alliance on Monday, building on a marketing partnership that dates back to 1997.
As part of the new agreement, Amazon said its e-commerce technology will power AOL's shopping destinations, giving the e-tailer direct access to 350 AOL merchants and AOL's 30 million-plus members. In return, Amazon said it would promote AOL as its exclusive Internet service provider (ISP).
The agreement also reportedly contains provisions that are standard in stock-sale agreements, such as rules barring AOL and its affiliates from acquiring a stake of more than 5 percent in Amazon or from seeking control of the company's board -- without an additional agreement.
Officials at Amazon and AOL did not respond to requests for comment.
Shares Down
Amazon shares were at $11.69 in morning trading Wednesday, down 37 cents. The shares took a beating Tuesday, after the e-tailer reported a net loss of $168 million, or 47 cents per share, for the second quarter ended June 30th.
The company posted a pro forma loss -- a figure that excludes numerous charges and other expenses -- of $58 million, or 16 cents per share, which was half the year-earlier loss, and better than the 22 cents expected by analysts.
Amazon said it expects a pro forma profit by the end of this year, and predicted third-quarter sales would total from $625 million to $675 million. Second-quarter sales were $668 million.
Cheering the Deal
Analysts who follow Amazon for Goldman Sachs cheered the deal with AOL, saying the investment provides "a significant credibility stamp for both Amazon's equity value as well as the importance of e-commerce and Amazon in the converging world."
Others, however, suggested the deal may
hamper
Amazon when it comes to making deals with AOL competitors.
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