(Updates with closing share price in final paragraph.)
Aug. 13 (Bloomberg) -- AOL Inc., the operator of the Huffington Post and other websites, plans to raise as much as $345 million by selling convertible notes, providing funding it could use to keep expanding in the advertising market.
The company will use $50 million of the proceeds from the private sale to buy back shares from the note acquirers as part of a previously announced $150 million repurchase program, according to a statement yesterday. The proceeds will also fund hedge and warrant transactions to cover the AOL shares underlying the notes, and could pay for additional stock repurchases, acquisitions or other transactions.
AOL is adding the funding, which represents about a 10th of its market value, as it makes the transition from producing websites to becoming a platform for advertising sales across the Web. In the past year, the company has acquired ad technology firms such as Convertro Inc., Gravity and Adap.tv Inc. to expand in the business.
The convertible notes will have a strike price “significantly above” AOL shares at the time of the transaction’s closing, said Eoin Ryan, vice president of investor relations. Funding in the convertible market currently carries a cost of capital of about 1 percent, he said, making it more attractive than other types of financing.
The company, based in New York, closed the second quarter with $101.6 million in net debt, or about 0.3 times earnings over the past 12 months, according to data compiled by Bloomberg. AOL said earlier this month that its ad platform unit will be profitable in the second half of the year.
AOL climbed less than 1 percent to $42.46 at the close in New York. The shares have slid 8.9 percent this year.