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AOL unloads its CD division

AOL Time Warner will sell its DVD- and CD-manufacturing operations to Canada's Cinram for $1.05 billion in its latest attempt to whittle down its massive debt.

AOL Time Warner will sell its DVD- and CD-manufacturing operations to Canada's Cinram International for $1.05 billion in its latest attempt to whittle down its massive debt.

Under the deal announced Friday, Cinram, which specializes in CD- and DVD-manufacturing, will take over operations for Warner Music Manufacturing Europe, Ivy Hill, Giant Merchandising, and the physical distribution operations of Warner-Elektra-Atlantic (WEA). WEA's sales and marketing will remain under Warner Music Group, AOL Time Warner's recording division.

AOL Time Warner's Warner Home Video and New Line Cinema movie businesses also have agreed to use Cinram for its DVD- and CD-manufacturing and distribution in North America and Europe.

The sale highlights AOL Time Warner's ongoing campaign to sell off peripheral businesses to reduce its mountain of debt, pinned at $26.3 billion as of April. Company CEO Richard Parsons has put debt reduction at the top of his priority list. The company's planned public offering of Time Warner Cable is slated for later this year.

Friday's deal "demonstrates the significant progress we've made toward fulfilling our commitment to reducing debt through free cash-flow generation and the sale of nonstrategic assets," Parsons said in a statement.

The media giant has been trying to rebound after revenue plummeted in its America Online division. Since the merger between AOL and Time Warner in January 2001, the combined company has seen its revenue and profits fall short of expectations, largely because of the AOL unit. In response, the original dealmakers, including former CEO Gerald Levin and former Chairman Steve Case, have vacated their positions.

With Parsons at the helm, AOL Time Warner has been selling off a number of its businesses and investments to meet his debt-reduction goals. In April, the company sold its Comedy Central stake to Viacom for $1.2 billion in cash. The media giant also ended its relationship with GM Hughes, which owns satellite TV provider DirecTV.

In addition, AOL Time Warner received $750 million from Microsoft to settle its lawsuit against the software giant filed by AOL's Netscape Communications subsidiary.

In total, AOL Time Warner will shave $3.8 billion off its debt, Parsons said in a statement. The CEO previously said the planned initial public offering of Time Warner Cable is expected to raise an additional $4 billion in proceeds to pay off debt.