NEWS

Verizon Communications to buy AOL for $4.4 Billion

Tuesday, May 12, 2015

Verizon Communications Inc. agreed to buy AOL Inc. in a deal valued at $4.4 billion, getting access to automated advertising technology and digital media clips that will help it make more money from mobile video.

Verizon, the largest U.S. wireless provider, will pay $50 a share, a 17 percent premium over AOL’s stock price on Monday. AOL Chief Executive Officer Tim Armstrong will continue to lead AOL’s operations after the deal is completed, the companies said Tuesday in a statement.

By pairing AOL’s so-called programatic ad technology -- which uses high-powered machines to buy and sell ad space -- with mobile content, Verizon will get a new revenue stream at a time its main business faces increasing competition from challengers like T-Mobile US Inc. AOL has been expanding its role as a provider of advertising technology in recent years, and last month unveiled technology that helps marketers decide where to best spend their money, putting it in direct competition with two leading Web ad companies, Google Inc. and Facebook Inc.

“They want to integrate advertising and content programming with their wireless network,” Roger Entner, an analyst with Recon Analytics based in Dedham, Massachusetts, said of Verizon. “It’s an ambitious plan, the mobile advertising market is dramatically dominated by Google.”

AOL’s shares jumped as much as 19 percent to $50.70 in early trading, slightly above Verizon’s offer price.

Different AOL

AOL today is a much different company now from 15 years ago, when it agreed to merge with Time Warner Inc. in what was one of the world’s largest deals, and also the largest takeover failures. Two years after the deal, the value had dropped by two-thirds and the merger ended in a spinoff six years ago.

Verizon is acquiring AOL as it plans to start a mobile video streaming service featuring live TV, original shows and pay-per-view. The carrier has been planning a service for as early as June, a person familiar with the talks has said.

Verizon said it plans to fund the deal with cash on hand and commercial paper. The transaction is expected to be completed by the end of the summer, the companies said.

 

bloomberg.com