Verizon Communications is purchasing AOL in a transaction valued at $50 per share, for an approximate total of $4.4 billion. The acquisition is designed to further drive the telecom provider’s online and mobile video strategies, particularly advertising, and will support and connect Verizon’s IoT platforms with consumers and businesses.
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. Subject to customary regulatory approvals and closing conditions, the companies expect to close the transaction in summer 2015.
“Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform,” said Lowell McAdam, Chairman and CEO at Verizon. “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”
Tim Armstrong, Chairman and CEO of AOL, will continue to lead AOL operations after closing, according to a company statement.
“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,” Armstrong wrote in an internal memo to AOL employees. “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,”
AOL — a company that once gained prominence in the late 1990s as an internet service provider — has redefined itself in recent years, largely focusing on digital media, content and advertising. AOL’s key assets include its subscription business and its programmatic advertising platforms. It also holds a portfolio of global content brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, as well as its millennial-focused OTT (over-the-top video) original video content.
In 2013, AOL further established itself in the advertising space, purchasing video ad exchange Adap.tv in a $405 million deal. To add to that, Verizon is preparing to launch a mobile-focused video service in summer 2015 that will offer a mix of paid, free and ad-supported content. The service will feature shorter snippets rather than full 30 or 60 minute programs, according to a Wall Street Journal report. Additionally, the service may include multicast programming to deliver live content such as sports, concerts and other on-demand viewing.
“AOL’s focus on unifying the advertising experience across display, video, mobile and TV makes it an attractive asset because advertisers are looking for better ways to reach their audience across screens,” said Lauren Fisher, Analyst at eMarketer in a statement to the Associated Press. “Coupled with Verizon’s existing mobile (and streaming video) presence, the companies’ combined ad offerings mean massive cross-screen reach with much richer audience data.”
Bloomberg initially reported in January that Verizon had been exploring potential acquisition or joint venture with AOL, but McAdam shot down the speculation, asserting that AOL could serve as a possible partner in content distribution.