Verizon Communications positioned itself for further expansion into the mobile and online video distribution markets with an agreement on Tuesday to acquire AOL, Inc. for $4.4 billion in cash. Since reaching its zenith during the 1990s “dot-com” boom as one of the nation’s top providers of dial-up Internet access services, AOL has reinvented itself as a key player in the market for online ad technology and has amassed a stable of online news and other websites that include the Huffington Post, TechCrunch and Engadget. AOL also continues to offer dial-up Internet services in rural and other areas that lack access to broadband network infrastructure.
At a press gathering, Verizon CEO Lowell McAdam explained that the AOL deal is intended to facilitate Verizon’s ability to offer program content that can be accessed over the company’s LTE wireless or over-the-top (OTT) online video platforms. Observing that “we’ve been strategically investing in emerging technology . . . that taps into the market shift to digital content and advertising,” McAdam proclaimed that “AOL’s advertising model aligns with this approach.” Tim Armstrong, the CEO of AOL, agreed that the union of Verizon and AOL “creates a unique and scaled mobile and OTT media platform for creators, consumers and artists.” Observing that both companies “have existing successful relationships,” Armstrong said, “we are excited to work with the team at Verizon to create the next generation of media through mobile and video.”
Under the terms of the agreement, Verizon will pay $50 in cash for each of AOL’s shares, which represents a 17% premium over AOL’s closing share price as of Monday. Contingent upon receipt of regulatory and other required approvals, the parties expect to consummate the transaction this summer.