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Verizon to buy AOL for $4.4 billion; to expand OTT services

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Verizon Communications is looking to purchase AOL (American Online) in a $4.4 billion all cash deal. The deal values AOL at $50 a share, 23% more than its three month average share price. The deal, which is still pending regulatory approval, is expected to close by August this year.

The deal will include all of AOL’s properties: Its content properties like Huffington Post, Moviefone, Engadget, TechCrunch and Stylelist, advertising properties like AOL advertising, advertising.com, 5min Media and StudioNow, local services like MapQuest and its membership services like dial up internet access, AOL Mail, AIM and About.me.

Post acquisition, AOL will become a wholly owned subsidiary of Verizon, while CEO of AOL Tim Armstrong will continue to lead the company. According to Verizon it will fund the transaction using cash on hand and commercial paper. Interestingly, Armstrong mentioned to CNN that they do not expect regulatory issues, and that there would be no job cuts (at AOL).

Why this acquisition?

Verizon mentions this acquisition will help drive its LTE wireless video and OTT services, as well as support its plan to provide cross-screen connections for consumers, advertisers and creators in tandem with its IoT (Internet of Things) platforms. Note that Verizon provides traditional cable TV and TSP services in the US, and given that users increasingly prefer to watch content online as opposed to on cable, its push to offer OTT services makes sense. Verizon had even launched a couple of channels AwesomenessTV and DreamWorksTV as OTT offerings in March.

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AOL’s content platforms like Techcrunch publish lots of videos and will let Verizon expand its OTT offerings. Additionally, Verizon could leverage AOL’s advertising properties to itself offer digital advertising, to compete with digital ad giants like Google and Facebook.

AOL Timeline: Founded in 1983, AOL is not stranger to acquisitions, having acquired well over 50 companies during its lifetime. Some of the more significant acquisitions made by the company include:

Acquisition of the Netscape browser in November 1998 for $4.2 billion.

– Acquisition of the media company Nullsoft which was responsible for the popular Winamp media player, in June 1999. This deal was reportedly worth $400 million.

Acquisition of MapQuest in December the same year for $1.1 billion.

– In Early 2000, AOL made its biggest acquisition ever, that of Time Warner for $164 billion. This acquisition turned out to be one of the biggest disasters of all time, with the combined companies reporting a loss of $99 billion by 2003. AOL was eventually spun off by Time Warner as a separate company in 2009.

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– In June 2004, AOL acquired Advertising.com for $435 million in an all cash deal. To further boost its advertising division, the company acquired the German ad firm AdTech in May 2007.

– AOL acquired the UK-based social networking site Bebo for $850 million in cash in March 2008.

– As for its media properties, AOL acquired Techcrunch in September 2010 for an undisclosed amount, and subsequently acquired Huffington Post in February 2011.

Image source: Wikipedia

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