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AOL Announces Pricing Of $330 Million Private Offering Of 0.75% Convertible Senior Notes And Pricing Of Private Note Hedge Transactions And Warrant Sales

AOL Inc. (NYSE:AOL) announced today the pricing of its private offering of $330 million aggregate principal amount of 0.75% Convertible Senior Notes due 2019 (the “notes”) to be sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The offering was upsized from the previously announced $300 million aggregate principal amount of notes. AOL has granted the initial purchasers of the notes a 30-day option to purchase up to an additional $49.5 million aggregate principal amount of notes. The offering is expected to close on August 19, 2014, subject to customary closing conditions.

The notes will be AOL’s unsecured obligations, effectively subordinated in right of payment to any future secured senior indebtedness and structurally subordinated to all existing and future indebtedness of AOL’s subsidiaries. The notes will pay interest semi-annually in cash on March 1 and September 1 at a rate of 0.75% per year, commencing March 1, 2015. The notes will mature on September 1, 2019, unless earlier repurchased or converted.

AOL estimates that the net proceeds from the offering of the notes will be approximately $319.9 million (or approximately $368.1 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting the initial purchasers’ discount and estimated offering expenses. In addition, AOL expects to receive proceeds from the sale of the warrants described below. AOL expects to use (i) approximately 40 million of the net proceeds from the offering to repurchase shares of its common stock from purchasers of the notes in this offering in privately negotiated transactions, (ii) approximately $31.8 million of the net proceeds to fund the cost of the convertible note hedge transactions (net of the proceeds from the warrant transactions) with the hedge counterparties, as described below, and (iii) the remainder of the net proceeds for general corporate purposes, which may include additional share repurchases, acquisitions or other strategic transactions and working capital. The stock repurchases are part of AOL’s previously announced $150.0 million share repurchase program. The purchase price per share of the common stock repurchased in such transactions will equal the closing price per share of AOL common stock on August 13, 2014, which was $42.46. In addition, following the offering AOL may repurchase additional shares of its common stock pursuant to its stock repurchase program. These repurchases, as well as repurchases from purchasers of notes in the offering, could increase, or prevent a decrease in, the market price of AOL common stock or the notes.

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