AOL shares jumped Thursday after the company said that it is handing over operations of its troubled local-news business, Patch.
The Internet company said late Wednesday that it has formed a joint venture with investment firm Hale Global. Patch will be operated and majority owned by Hale. AOL will keep a minority interest in Patch.
AOL CEO Tim Armstrong co-founded Patch, an ambitious experiment in community news meant to compete with newspapers, in 2007. AOL bought it in 2009 after Armstrong came on board. But the division ran into problems, and was a financial drag on the company.
AOL said last year that it would lay off half of Patch's staff to cut the division's losses. It closed down about a third of Patch's community websites, leaving it with 900. In its most recent quarter, the company took a $25 million charge on Patch.
Cowen analyst John Blackledge said the deal eliminates an unprofitable distraction for AOL, allowing management to focus on its core business. The financial terms of the deal were not disclosed but the analyst said in a research note that he doesn't believe AOL received any monetary benefit in the exchange.
Shares jumped $4.15, a nearly 9% gain, to $51.40 in afternoon trading. Its stock, as of Wednesday's close, is up nearly 58% for the past 12 months.
