AOL Time Warner has repurchased Vivendi Universal's preferred shares in AOL Europe for $812.5m (£523m) in cash.
In March 2001, Vivendi agreed to exchange 55% interest in AOL France for non-voting preferred shares in AOL Europe to be repurchased in April 2003.
Although the transaction was expected, AOLTW's decision to pay cash for the stake came as a surprise, given that the company is trying to reduce its multibillion-dollar debt.
However, AOLTW chairman-elect and chief executive officer Dick Parsons said the company decided to make a cash purchase because its stock price is trading so low.
AOLTW's stock has fallen some 70% since the conglomerate was formed when America Online and Time Warner merged in January 2001.
For 2002, AOLTW reported a loss of almost $99bn, prompting it to put in place a rigid debt reduction plan to regain stockholder confidence and boost its sagging stock price.
"We believe that repurchasing this interest in AOL Europe with cash, rather than equity, is the right decision for our stockholders, given the trading price of our stock," Parsons said.
He added that although the transaction would increase AOLTW's net debt, the company remained committed to meeting its previously stated debt reduction targets.
AOLTW has approximately $8bn remaining in committed available funding.