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 toinvest $100 million in Amazon as part of a five-year alliance — allows AOLto talk to Amazon directors about a possible buyout, as long as thediscussions remain confidential.
Such a provision normally is not part of a contract, said Michael Goldman, amerger-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.
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 powerAOL’s shopping destinations, giving the e-tailer direct access to 350 AOLmerchants and AOL’s 30 million-plus members. In return, Amazon said itwould promote AOL as its exclusive Internet service provider (ISP).
The agreement also reportedly contains provisions that are standard in stock-saleagreements, such as rules barring AOL and its affiliates from acquiring astake of more than 5 percent in Amazon or from seeking control of thecompany’s board — without an additional agreement.
Officials at Amazon and AOL did not respond to requests for comment.
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 andother expenses — of $58 million, or 16 cents per share, which was half theyear-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 saleswere $668 million.
Cheering the Deal
Analysts who follow Amazon for Goldman Sachs cheered the deal with AOL, saying theinvestment provides “a significant credibility stamp for both Amazon’sequity value as well as the importance of e-commerce and Amazon in theconverging world.”
Others, however, suggested the deal may hamper Amazon when it comes to making deals with AOL competitors.