Fox Business reports:
AOL (AOL) shopped its Patch news service for several months to various media companies before reaching a deal with private equity firm Hale Global for what’s been described as a low-ball bid for the money-losing venture, the FOX Business Network has learned.
Officially, AOL entered a joint venture with a financial buyer, announcing on Wednesday that it is partnering with Hale Global. But under the terms of the deal, the private equity firm will have full operational control and a majority stake in the Patch business.
People with direct knowledge of the deal tell FOX Business that the various negotiations were moving slowly even though AOL was eager to offload its failed investment, people with knowledge of the matter said.
AOL shopped Patch to Gannett Co. and Tribune Co.., and others, these people say, but both media companies were skeptical about Patch’s ability to eventually turn a profit and the talks broke down. The media buyers also believed it would be difficult to integrate the businesses and make Patch profitable, these people add.
Unable to find a strategic buyer among various media players, AOL finally settled on a deal with Hale, which is regarded on Wall Street as a firm that looks for so-called turnaround situations.
An AOL internal memo said Hale is “dedicated to nurturing Patch’s growth,” but a source familiar with the deal said that Hale may ultimately “dismantle” Patch, selling off the assets to multiple buyers. Hale will soon be determining which employees it wants to retain and which will be laid off, the person said.
AOL CEO Tim Armstrong previously promised that the company would find a solution for Patch by the end of 2013.
Media experts once regarded Patch as the future of journalism. Its “hyper-local” news sites were considered a replacement to the dying breed community newspapers that had traditionally supplied local news to small towns and cities.
Gannett and Tribune declined comment on the deal. AOL bought Patch for $7 million and reportedly spent $100 million on it after that. AOL still owns Huffington Post and TechCrunch and they reportedly may still try to buy Business Insider.
Quinton is a native South Carolinian who has lived in Baltimore since 2006. He is a recent convert to the Catholic Church and is active in the Knights of Columbus. He has been involved in the pro-life movement nationally and locally since 2010.
Quinton is a veteran who served as an intelligence analyst in the Army National Guard. He is also an Eagle Scout.