Verizon Communications Inc said that in order to reinforce mobile, ad offerings, it would buy AOL Inc in a deal worth $4.4 billion. This deal would result in the largest wireless carrier access to the AOL’s mobile content and video platform.
Before the opening bell on Tuesday, the shares of AOL traded as high as $50.70, while those of Verizon were down nearly 1% at $49.32.
This offer basically signifies the need for telecom companies to diversify their operations as their businesses mature and more consumers watch access videos and other content on cellphones.
The Chief Executive of AOL, Mr. Tim Armstrong, said that mobile will represent almost 80% of media consumption in the upcoming years.
Armstrong further, says in the memo that Verizon would bring over 100 million mobile consumers and content deals with a meaningful strategy in the world of mobile video.
In the year 2000, AOL bought ‘Time Warner’ at more than $160 billion. But it turned out to be as the most catastrophic merger in the entire corporate history. Afterwards, in 2009, AOL spun off from Time Warner at $3.4 billion.
Since a long time Armstrong had spearheaded AOL’s transformation into the most successful advertising company.
The Starboard Value LP urged Yahoo Inc to consider a merger with AOL, but Starboard could not be reached immediately any comment.
Verizon has been investing in emerging cutting-edge technologies, on order to tap into the digital content and advertising market.
AT&T Inc. is also diversifying its operations by buying DirecTV, (the leading US satellite TV provider) for $48.5 billion.
AOL reported that the demand for its real-time bidding platform increased up to 7.2% in the first-quarter. This platform is ideal for the advertisers display ads and videos on other digital properties.
This deal including a debt of $300 million, will take the form of a tender offer that is followed by the merger.
Verizon’s advisers were Weil Gotshal & Manges and Guggenheim Partners, LionTree Advisors, while AOL’s advisers were Wachtell Lipton Rosen & Katz and Allen & Co LLC
AOL’s shares gained 12%, while Verizon’s 3.4% in the last 12 months, up to Monday’s close.