| NEW YORK
NEW YORK Jan 15 AOL Inc is handing
majority ownership of Patch, a money-hemorrhaging network of
local news websites, to New York investment firm and turnaround
specialist Hale Global, the companies announced on Wednesday.
In a joint venture, AOL will transfer Patch to a new limited
liability company which will be run by Hale Global will. AOL
will retain a minority interest.
Terms of the deal were not disclosed. AOL said the deal was
not financially material.
Hale Global is a 13-year-old company that specializes in
online media, mobile and advertising.
The partnership is the latest chapter in the history of
Patch, a network of more than 900 websites covering events and
news in communities such as Montclair, New Jersey and Malibu,
Investors and analysts have long urged AOL to stop pouring
funds - so far totaling hundreds of millions of dollars - into
Patch with little return.
The costly project was one reason that activist hedge fund
Starboard Value took a position in AOL and tried to win seats on
the board in an ultimately unsuccessful proxy battle.
Tim Armstrong, AOL's chief executive and himself an early
investor in Patch, had promised that it would achieve
profitability in 2013. Steps aimed at reaching that goal
included slashing the staff of 1,000 to half its size late last
summer and launching a search for either a partner or a buyer.
Patch was founded in 2007. Two years later, AOL bought the
group of community websites for about $10 million, according to
reports at the time. (Armstrong recused himself from the AOL
purchase and took AOL stock in return for the seed money.)
Patch hoped to capitalize on the woes of a retrenching daily
newspaper industry that has been cutting back on local coverage.
The idea was also to grab some of the billions of dollars that
go toward local advertising.
Local advertising spending in the Unites States is expected
to reach $107 billion, according to research firm Borrell
Associates, while online local ad spend is forecast to hit $34
Still, those dollars are elusive because harvesting them
requires a large sales force with local knowledge, often an
"We are committed to bringing users, local businesses,
writers and advertisers together into a Patch experience full of
innovation and growth," Charles Hale, CEO of Hale Global, said
in a statement.
It was unclear how Hale Global plans to structure Patch and
whether there will be further layoffs.