Whatever AOL’s value as a business, if TWX wants to unload it to a single bidder it may be difficult to get full value. If you were Microsoft or Google and had a pile of cash, and AOL were worth $X billion by your calculation, would you bid X? I don’t think so. The rational thing, if you are one of a few bidders and everyone knows that the seller is eager to sell, is to bid low, perhaps at a level where you can’t go wrong if your bid is accepted. I suspect that that amount is significantly less than the total value TWX shareholders would gain via a well managed public offering.
After all, Time Warner is the company that bought AOL near the top. Wouldn’t you also expect them to puke it out near the bottom? That’s the course that this kind of corporate acquisition tends to take. Microsoft and Google know that too, and I doubt that they will be willing to do the deal without getting a big enough edge to make this trade an instant winner. TWX is fighting the tides if it thinks it will get a good price by selling AOL to a cash-rich corporate savior.
EGG-ON-FACE UPDATE: A commenter reminds me that it was AOL that bought Time Warner, a transaction that reflected very well on AOL’s Steve Case, who used inflated AOL stock to pay for it, and not so well on Time Warner’s then-management (but not its current management).