The US-based wireless carrier Verizon Communications Inc has agreed to acquire AOL Inc for approximately $4.4 billion in an all cash deal, as part of its strategy to augment its mobile-video offerings, the company said in the statement.
Verizon will have to shell out $50 a share for AOL, a 17 per cent premium over the company’s closing share price of $42.59 on Monday. The transaction will take the form of a tender offer followed by a merger.
The acquisition will help Verizon, the largest mobile phone operator in US, drive its growth and strengthen its presence by entering into the increasingly competitive online video space wherein it could use AOL's advanced technology developed for selling ads and delivering high-quality web video.
Verizon already distributes mobile video through its robust national mobile phone network. The agreement will also help and connect to Verizon’s IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses, the statement said.
“This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience,” Verizon CEO Lowell McAdam said in the statement.
AOL is into digital content and advertising business. It also owns online news websites such as The Huffington Post and TechCrunch, which will become part of Verizon once the acquisition is completed, along with its video and online advertising technology.
The key assets of the company, apart from The Huffington Post and TechCrunch, include Engadget, MAKERS and AOL.com, as well as its millennial-focused OTT, Emmy-nominated original video content, and its programmatic advertising platforms.
“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,” Tim Armstrong, AOL chairman and CEO, said. Armstrong will continue to lead AOL operations after closing.
The deal, which Verizon plans to fund with cash and short-term debt, is expected to be completed by the end of the summer, it said.
While Guggenheim Partners, LionTree Advisors and Weil, Gotshal & Manges acted as transaction advisors to Verizon, AOL’s advisers were Allen & Company LLC and Wachtell, Lipton, Rosen & Katz.
Founded in early 1990, AOL provided online connectivity and services to US users and acquired Time Warner for over $160 billion in 2000. However, AOL was spun off from Time Warner as an independent company in 2009 and was listed on the New York Stock Exchange at a value of $3.4 billion.
Last year, Verizon completed acquisition of Vodafone Group Plc's 45 per cent indirect holding in Verizon Wireless in a transaction valued at approximately $130 billion.