AOL Time Warner to Buy Back $5 Billion of Stock

AOL Time Warner on Thursday announced it will buy back up to $5 billion of its stock in the open market starting in February and running over the next two years.

The move comes as AOL’s stock continues to languish below its all-time highs reached prior to the January 2000 announcement of the mega-merger between America Online and Time Warner.

The board of directors made its decision earlier today at its very first meeting following last week’s completion of the deal. The buyback program is part of a series of steps designed to increase return on capital and build shareholder value.

“We said we would hit the ground running and that is exactly what we are doing. We have a clear road map for creating dynamic value for our shareholders and the stock repurchase program we are announcing today is part of our commitment to improving the return on our invested capital. Thanks to the strong growth prospects for our company, we’re able not only to continue to invest in our world-class businesses, but to use a portion of our growing financial capacity to buy back stock at a time when we believe our shares are undervalued,” said Gerald M. Levin, chief executive officer of AOL Time Warner.

The stock repurchase program — one of the largest in corporate history — will be financed in part with a $10 billion shelf registration. Within the next several days, the company plans to file a universal shelf registration statement with the Securities and Exchange Commission to offer $10 billion worth of debt securities, common stock, series common stock, preferred stock and warrants to purchase debt and equity securities.