Verizon pays $4.4bn for AOL

US-based telco Verizon will pay US$4.4 billion to acquire digital content and distribution group AOL.

The deal represents a purchase price of US$50 a share, and comes as Verizon implements a strategy that includes targeting growth in OTT markets.

The companies will be keen to ensure their merged group will fare better than AOL’s last major M&A move – the ill-fated merger with Time Warner. That ended after the dotcom bubble burst.

Since then, AOL pushed heavily into original programming and digital content distribution in recent years after repositioning from a tech-focused web portal.

Key brands now include The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com; has a huge library of millennials-focused OTT original video content; and various programmatic advertising platforms.

At its recent Digital Content NewFront in New York, AOL revealed new original shows for its AOL On premium content platform such as Beyond the Horizon with Jared Leto and a programme distribution pact with NBCUniversal, which is ironically part of Verizon competitor Comcast Communications. AOL has also renewed popular series Park Bench with Steve Buscemi (pictured).

AOL, which has a video library of more than one million premium videos in total, is also moving towards a year-round original commissioning strategy and co-branded video launches that improve advertising potential.

“AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world,” said Verizon chairman and CEO Lowell McAdam.

“At Verizon, we’ve been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”

AOL chairman and CEO Tim Armstrong will continue to lead the company after the cash and commercial paper deal closes. The transaction will take the form of a tender offer followed by a merger. AOL will become a Verizon subsidiary at the end of this summer providing regulatory approvals and closing conditions are met.

LionTree Advisors, Guggenheim Partners and Weil, Gotshal & Manges advised Verizon on the deal with Allen & Company LLC and Wachtell, Lipton, Rosen & Katz doing the same for AOL.