Hale Global to acquire major stake in the struggling hyperlocal website group after years of losses and staff layoffs
AOL's local news website Patch has found a new majority stakeholder, investment holding company Hale Global, the companies announced on Wednesday. The news came six months after AOL laid off nearly 500 staffers.
Under the terms of the agreement, Patch will be spun off into a new LLC that is majority owned and operated by Hale, while AOL retains a small minority interest.
Hale Global plans to apply new technological solutions to revitalize the struggling website, which has been a loss leader for AOL. In November the company reported a third-quarter earnings crunch due to its problems with Patch, including a pre-tax restructuring charge of $19 million and an impairment charge of $25 million, which drove operating income down 61 percent. The site has lost as much as $300 million for AOL since it was folded into the company in 2009.
“Along with AOL, we are committed to taking the necessary steps to ensure Patch remains a vibrant part of the community,” Charles Hale, CEO of Hale Global, said in a release announcing the venture.
“Patch is an important source of information for communities, and the joint venture we created has a unified mission to provide local platforms and hyperlocal content,” Tim Armstrong, chairman and CEO of AOL added.
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Armstrong created Patch in 2007 and folded the local news network into AOL when he took over the company in 2009. The CEO famously fired a Patch staffer on the spot for taking photos during a staff meeting about Patch layoffs in August 2013.
Financial terms of the transaction were not disclosed.
Armstrong sent the following memo to AOL staffers, according to TechCrunch (which is owned by AOL):
AOL has a strong track record of improving, pivoting, and partnering – that's what successful companies and start-ups do. AOL's return to growth has been built by making smart investments and by calibrating our investments while moving through opportunities.
We pivoted our ads business to programmatic, we pivoted our content business to powerful brands, and we pivoted our video production to becoming a video platform.
Today we are pivoting another area of our business: local. The local digital space will reach $152B by 2017, driven by a $21B growth in local digital revenue over the next three years and we have invested in local with Patch. The goal for Patch has always been simple – to be a local platform for information and commerce in towns and to serve communities in a meaningful and human way.
After extensive discussions over the last several months with many companies interested in the local media business and local platform business, today we are announcing a joint venture partnership with Hale Global. Hale Global is a private company that has a successful track record of investing and growing technology assets, and we believe they are very well positioned to nurture and grow Patch. Hale has made investments in local commerce and platforms, and they have a strong team of leaders and technical expertise. Hale's CEO, Charlie Hale, is a strong believer in the power of local, local platforms, and local storytelling. Bud Rosenthal and Charlie Hale will be detailing Patch's go-forward plan and next steps with the Patch team today.
AOL has delivered on our commitment to our investors and put Patch in a position to be successful. We are retaining a meaningful minority interest in the joint venture, and we stand to benefit from Patch's pivot to platform excellence.
While Patch pivots, it is important to remember that it serves millions of consumers throughout hundreds of towns in America and partners with some of the largest and smallest businesses that serve those communities. Hale will help Patch improve, and we will be partners with Hale in the next phase of the journey – TA