Verizon agrees to acquire AOL for $4.4 billion

Steven Loeb · May 12, 2015 · Short URL:

AOL's efforts to transform into a video and advertising platform seem to have payed off nicely

In recent years, following the end of its disastrous merger with Time Warner, AOL has been turning itself into a different company, one focused on video and programmatic advertising.

Those efforts have now attracted the attention of Verizon, which announced on Tuesday that it intends to purchase the company for for $50 per share, which equal an estimated total value of approximately $4.4 billion.

The acquisition will help Verizon to bolster its wireless video and and OTT (over-the-top video) strategies, the company said. Those platforms will also be connected to Verizon's IoT (Internet of Things) platforms.

"Verizon's vision is to provide customers with a premium digital experience based on a global multiscreen network platform," Lowell McAdam, Verizon chairman and CEO, said in a statement. "This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience."

Following the completion of the merger, AOL will become a wholly owned subsidiary of Verizon, and Tim Armstrong, AOL chairman and CEO, will continue in his current role, running the company.

"Verizon is a leader in mobile and OTT connected platforms, and the combination of Verizon and AOL creates a unique and scaled mobile and OTT media platform for creators, consumers and advertisers," said Armstrong. "The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video."

In 2000, AOL purchased Time Warner for $164 billion in order to combine AOL's online services with Time Warner's media and cable assets, and create a media conglomerate. 

The two companies were never a good fit, and those corporate synergies never materialized. Time Warner chief Jeff Bewkes eventually called the merger, "the biggest mistake in corporate history." In 2009, the two companies broke up and went their separate ways.

In the ensuring years, AOL has shift focus, turning itself into a video and advertising platform. It purchased video advertising platform for $405 million in 2013. It was is one of AOL's largest acquisition ever, even more than the $315 million it paid for the Huffington Post in 2011, but it paid off, leading the company to see double digit ad growth for the first time since 2008.

AOL purchased video management and exchange platform Vidible at the end of 2014. The company also owns a number of content brands, including The Huffington Post, TechCrunch and Engadget.

The acquisition by Verizon is subject to customary regulatory approvals and closing conditions and is expected to close this summer. But it already has one proponent: AOL co-founder Steve Chase, who tweeted his approval on Tuesday.

Also approving of the deal are AOL's investors, who have shot the company's stock up over 18%, or $8, to $50.60 a share. 

Shares of Verizon are down slightly, 0.72%, or $0.36, to $49.44 a share.

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