Verizon on Tuesday agreed to acquire AOL in a deal worth $4.4 billion, boosting the U.S. telco’s foothold in the online content and advertising markets.
Verizon’s $50 per-share offer represents a 17% premium on AOL’s closing price on Monday. The transaction will take the form of a tender offer followed by a merger, after which AOL will become a wholly-owned subsidiary of Verizon. Verizon said it will fund the transaction through a combination of cash on hand and commercial paper.
"AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world," said Verizon CEO Lowell McAdam, in a statement.
Verizon was linked with a move for AOL in January. McAdam admitted at the time that AOL would make a good commercial partner but played down the possibility of buying the company outright.
That position has clearly changed, with Verizon highlighting AOL’s advertising platforms, content brands and subscription services as particularly attractive assets.
AOL owns a number of online titles, including the Huffington Post, TechCrun ch, and Engadget, in addition to its video unit AOL On. Its subscription services in include WiFi hotspot access, cyber security and cloud storage among others.
When it comes to online advertising though, AOL remains a long way behind heavy-hitters like Google and Facebook.
According to research firm eMarketer, AOL took a 0.74% share of the $145 billion global digital advertising market in 2014. Google was the market leader with a 31.4% share, followed by Facebook with 7.9%. In the U.S., AOL’s share of the $50.73 billion digital ad market was slightly better at 2.1% in 2014, but this was still down slightly from 2.3% in 2013.
Nonetheless, Verizon sees AOL as a worthy asset.
"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," McAdam said.
AOL chief executive Tim Armstrong will continue in his role once the deal closes, which Verizon expects to happen this summer.
"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," Armstrong said.
