Verizon agreed to buy AOL Inc. in a $4.4 billion deal aimed at advancing the telecom giant’s growth ambitions in mobile video and advertising.
The all-cash deal values AOL at $50 a share, a 23% premium over the company’s three-month volume-weighted average price. AOL shares rose 18% in morning trading to $50.18. Verizon shares fell 1.7% to $48.98.
The acquisition would give Verizon, which has set its sights on entering the crowded online video marketplace, access to advanced technology AOL has developed for selling ads and delivering high-quality Web video.
Verizon's surprise $4.4 billion deal for AOL underscores Verizon's ambitions to grow in the on-demand mobile video industry. WSJ's Keach Hagey joins Tanya Rivero on Lunch Break. Photo: Getty
“Certainly the subscription business and the content businesses are very noteworthy. For us, the principal interest was around the ad tech platform,” said Verizon’s president of operations, John Stratton, at a Jefferies investor conference early Tuesday.
The U.S. wireless business has matured in recent years, leaving carriers like Verizon, AT&T Inc. and Sprint Corp. increasingly fighting to steal market share from one another. Offering digital video-over-wireless connections represents a growth avenue in coming years for Verizon, which last year brought in $127 billion in revenue and profit of $12 billion.
Verizon has said it plans to launch a video service focused on mobile devices this summer. The company has offered few details, but last month Chief Financial Officer Fran Shammo said the service would offer a mix of paid, free and ad-supported content and wouldn’t try to replicate traditional TV.