Wednesday, May 13, 2015

US Telecom Giant Verizon Acquires AOL For $4.4 Billion

Image Credit: Mashable
US telecom giant Verizon announced plans Tuesday to acquire online pioneer AOL for $4.4 billion, advancing the telecom's giant growth ambition and online advertising play. The acquisition of AOL was described as a way to help Verizon build its presence in the online advertising market and digital media business.

The deal values AOL at $50 per share, a 23 percent over the company's three-month volume-weighted average stock price. AOL shares soar 18 percent in morning trading to $50.18 while Verizon shares fell 1.7 percent to $48.98. 

The deal aims to make a big push in the digital media business by combining one of industry's biggest mobile network providers with a major online content producer. It's part of Verizon's much bigger strategy- to dominate a future where all content from TV channels, mobile videos to publications are streamed over the internet. AOL is still a behemoth, it provides online video services, content and delivers ads to 40,000 publishers. It dominates the news industry with its leading news sites: The Huffington Post, Techcrunch and gadget review site Engadget

By acquiring AOL, Verizon gets more than just online advertising platform and premium content, it also gets ownership of a company's aging but still profitable business- AOL dial-up internet business. 

The deal, which is subject to regulatory approval,  is expected to complete this year. Verizon expects to finance the deal using cash on hand and commercial paper. The price Verizon is spending for AOL is a mere fraction of the massive $165 billion that AOL spent on Time Warner in 2000 merger.

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