At the current price,

AOL Time Warner


just can't bear to part with its shares.

The media and entertainment conglomerate said Tuesday that it had completed a long-expected transaction by paying

Vivendi Universal

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(V) - Get Report

$812.5 million in cash instead of using AOL Time Warner stock as currency, as was its option.

The decision indicates that AOL Time Warner's desire to cut its debt is somewhat reined in by management's refusal to believe that its stock's decline is permanent.

Shares in AOL Time Warner, which closed Tuesday at $12.45, up 29 cents, have ranged between $8.70 and $22.50 over the past year. The stock traded in the mid-50s after the closing of the America Online-Time Warner merger two years ago.

"We believe that repurchasing this interest in AOL Europe with cash, rather than equity, is the right decision for our shareholders, given the current trading price of our stock," said AOL Time Warner chairman Dick Parsons in a statement. "Although this transaction will increase our net debt, we remain fully committed to achieving our previously stated debt reduction targets."

The company, which reported net debt of $25.8 billion at the end of 2002, hopes to cut that figure to $20 billion by the close of 2004.