Peter Kafka

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AOL, Criterion Announce Yesterday’s Bebo Deal

For corporate/social network completists: AOL and Criterion Capital Partners have formally announced the Bebo deal that surfaced yesterday.

Neither side will fess up to a purchase price, though Dan Primack at PE Hub hears that Criterion’s initial offer for the property, which AOL (AOL) bought for $850 million in 2008, was no more than $2.5 million. The final price, he guesses, would be in the $5 million range.

On the plus side, AOL, in a Securities and Exchange Commission filing, says the transaction will allow it to record an income tax benefit of up to $325 million this quarter. Lemons from lemonade!

Criterion press release:

Los Angeles, CA–[June 17, 2010]–Criterion Capital Partners, LLC (CCP), a merchant banking and financial advisory firm based in the United States, announced today that it has acquired the Bebo business, the youth-centric social media network, from AOL Inc. As part of the deal, CCP will assume the rights and complete operating control over the global social platform business.

The acquisition and financing was lead by Adam Levin, managing partner at CCP, in partnership with accomplished business strategist Paul Abramowitz and Web entrepreneur Richard Hecker. CCP will take over Bebo’s global operations immediately and retain a San Francisco-based headquarters. Exact terms of the deal are not being disclosed by either party.

“The young, highly active user base, revenue history, presence in countries throughout the world and solid technical infrastructure make it an attractive media platform both as a standalone entity and in the context of our broader investment objectives,” said Levin.

“Criterion Capital Partners are specialists in facilitating growth plans and turnarounds, and are well placed to drive Bebo’s effort to strengthen its foothold within the highly competitive social networking arena,” said Tim Armstrong, Chairman and Chief Executive Officer, AOL.

Bebo launched in 2005 and was acquired by AOL in March 2008 for $850 million. It is a social media network that combines community, connections, self-expression and entertainment via a range of social tools, games and a growing mobile platform. Bebo has a strong user base across the globe, including in the U.S., the U.K., Ireland, Australia, New Zealand, Canada, Poland, France, Germany, Italy, Spain, India, Pakistan and the Netherlands.

About Criterion Capital Partners, LLC
Criterion Capital Partners is an integrated advisory and consulting firm serving U.S. and international clients who seek the preparation and implementation of APOs, outsourced business development, acquisitions or marketing strategies–executed concurrently with the organization and structuring of capital procurement. Led by Adam Levin, CCP delivers objective thinking, proven practices and best-of-breed partners to help clients achieve their specific development and financial goals.

AOL’s 8-K filing:

As previously announced, AOL Inc. (the “Company”) has been exploring strategic alternatives for its Bebo, Inc. (“Bebo”) subsidiary including a sale or possible shutdown. The Company has completed this process and is today announcing the sale of substantially all the assets of Bebo to an affiliate of Criterion Capital Partners, LLC.

The Company currently anticipates that following this transaction it will treat the common stock of Bebo as worthless for U.S. income tax purposes. The Company’s current U.S. income tax basis in Bebo is approximately $750 million. As a result of the anticipated worthless stock deduction for the common stock of Bebo under U.S. income tax law, the Company expects to record a deferred tax asset and corresponding benefit to its U.S. income tax provision in the second quarter of 2010 in a range of $275 million to $325 million. The Company’s tax conclusion with respect to the common stock of Bebo is subject to examination by the U.S. Internal Revenue Service. Additionally, given the recent volatility in the Company’s stock price and disposition activity, the Company will be required under generally accepted accounting principles to test the goodwill of its sole reporting unit for impairment in the second quarter of 2010.

[Image credit: donger]


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