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NEW YORK, Jan 15 (Reuters) - 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, California.
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 billion.
Still, those dollars are elusive because harvesting them requires a large sales force with local knowledge, often an expensive proposition.
"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.