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. AOL’s content…
