AOL Inc. (NYSE: AOL) announced this morning that it will complete the final steps needed to return approximately $1.1 billion to shareholders in the form of a special dividend of $5.15 per share.

Chairman and CEO Tim Armstrong said:

Today’s announcement underscores AOL’s commitment to delivering value for our shareholders. AOL remains committed to creating and unlocking value for all shareholders through smart execution and disciplined management of our asset portfolio.

The company will repurchase $600 million worth of its common stock under a fixed-dollar collared Accelerated Stock Repurchase Agreement with Barclays PLC (NYSE: BCS). Basically, AOL is depositing the funds with Barclays, which will then purchase a “substantial majority” of AOL shares by the end of this year:

The specific number of shares AOL will ultimately repurchase under the ASR Agreement will be based on a discount to the volume-weighted average share price of AOL common stock during the agreement period adjusted down by $5.15 for the payment of the special dividend. The purchase price will also be subject to floor and cap provisions establishing a minimum and maximum number of repurchased shares.

The special $5.15 cash dividend is payable on December 14 to shareholders of record as of December 5. The company also adopted a tax asset protection plan (a different flavor of a poison pill) to prevent “any individual, individual fund or family of funds with common dispositive power acquiring 4.9% or more of the Company’s outstanding shares without the approval of the Company’s Board of Directors.” Employee stock options will also be adjusted to ensure that the value of the options doesn’t change after the dividend is paid.

AOL’s shares are up more than 6.3% in premarket trading this morning at $35.00, a new 52-week high if it holds. Shares closed at $32.92 on Friday, in a 52-week range of $11.07 to $34.51.

Paul Ausick

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