14 DAY TRIAL // America’s largest carrier, Verizon, has announced this week that it has agreed to buy AOL Inc. for $4.4 / €3.92 billion, in a move that will give it access to digital content and Web advertising platforms.
Verizon is willing to pay $50 / €44 per share, which constitutes a 17% premium over AOL’s stock price registered on Monday. AOL’s Chief Executive Officer Tim Armstrong will continue to be in charge of AOL’s operations after the deal is completed.
During negotiations, AOL’s shares jumped by as much as 19% to $50.70 / €45.13 in early trading, a step above Verizon’s own offering price.
A full transaction will be completed this summer and will materialize into a merger soon after. Then AOL will become a subsidiary owned by Verizon.
AOL and Verizon are now a pair
In the official statement, Verizon claims that the acquisition further drives its LTE wireless video and OTT (over-the-top video) ambitions and strategy.
AOL’s expertise will help Verizon create a unique mobile and OTT media platform for creators, consumers and advertisers.
AOL’s brands include the Huffington Post, TechCrunch and Engadget. AOL’s CEO Tim Armstrong says in the official statement that the two companies share a joint vision and they have been engaged in successful partnerships before. Now, the connection between the two is taken to the next level.
The other area of AOL’s business that interests Verizon is probably the company’s still-lingering dial-up business, which continues to bring in a big amount of royalties. Last quarter, the company managed to pull in $182.6 / €162 million.
That might constitute a 7% decline compared to last year, but the business gets absolutely no investment and continues to run, which is pretty amazing to say the least. It remains to be seen how Verizon will choose to handle this customer base, but it’s a little early to make predictions nevertheless.
You might recall that, earlier this year, there were rumors saying that Verizon was eyeing to purchase the company. But the carrier dismissed those initial reports, which revealed that it was interested in making a move on AOL. It turns out Verizon just wanted to keep things secret until it was sure the deal would pull through.