Verizon to Acquire AOL

Verizon released a statement Tuesday in which it said the company will sign a deal to shore up its LTE wireless and over-the-top (OTT) video strategies. Verizon plans to do this by acquiring AOL. In addition, the agreement will also support and connect to Verizon’s Internet of Things (IoT) platforms. (For an updated opinion on this whole transaction, click HERE.)

The deal is said to have an estimated value of about $4.4 billion. The breakdown goes like this: Verizon will pay $50 a share for AOL, which represents a 17 percent premium over the company’s closing share price of $42.59 on Monday night. The deal will be funded through short-term debt and cash on hand.

Believe it or not, AOL’s dial-up business continues to remain a rather large revenue generator, as you can see from last quarter’s results of $182.6 million. This section is being seen as a good fit for Verizon. Actually, the acquisition of AOL includes more than just websites that host streaming content. Among the biggest assets that Verizon will acquire is The Huffington Post. This was acquired by AOL back in 2011 and it has recently been introducing international sites.

According to the New York Times, the details of The Huffington Post’s business have not been revealed, but late last year Tim Armstrong, AOL’s chief executive, said that the Huffington Post sites brought in hundreds of millions of dollars in annual revenue. When asked if Arianna Huffington, the founder and face of Huffington Post, was planning to work for Verizon, the answer was a resounding, “Yes.”

Armstrong remarked that, “The deal means we will be a division of Verizon and we will oversee AOL’s current assets plus additional assets from Verizon that are targeted at the mobile and video media space. The deal will not change our strategy, it will expand it greatly. The deal will give our content businesses more distribution and it will give our advertisers more distribution and mobile-first features. The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy.”

The transaction will take the form of a tender offer followed by a merger, with AOL becoming a wholly owned subsidiary of Verizon upon completion. Armstrong will continue to head up AOL after the deal is completed.

Lowell C. McAdam, who is Verizon’s chief executive, said, “Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”