AOL to be acquired by Verizon in $4.4 billion deal
Deal represents a large premium over AOL’s share price, driving up AOL stock in pre-market trading, and a huge multiple versus AOL’s 2014 net income
The legacy media company of the digital era, AOL, has been acquired by Verizon for $4.4 billion. The deal represents a large premium over AOL’s share price and on the news Verizon’s stock is falling in pre-market trading, while AOL stock is up 18 percent.
AOL has, of course, been the target of an acquisition before, having merged with Time Warner. It took a decade for Time Warner to eventually free itself of AOL, spinning it back out at the end of 2009. This time it will be Verizon’s turn to try and make something of AOL again. (The Time Warner deal was valued at $182 billion in stock and debt, fueled at the time by AOL’s inflated stock price – that makes today’s deal small in comparison, and this time Verizon is the acquiring party.)
In M&A terms, the deal is fairly priced based on revenue, poorly priced based on earnings. Last year AOL reported $2.5 billion in revenue, and net income of $125.6 million.
The growth area, and likely the thing that most attracted Verizon, is in what the company calls AOL platforms. AOL Platforms enables brands to reach consumers across desktop, mobile and TV through programmatic buying and performance-driven campaign solutions.
“Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform,” Lowell McAdam, Verizon chairman and CEO, said in the acquisition announcement. “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”
Tim Armstrong will remain in charge of AOL, having come on board the last time the company was spun off. AOL media brands include The Huffington Post, Moviefone, Engadget and TechCrunch.
There had previously been talk that Verizon was interested in AOL, and Yahoo! was said to be in the running, too, as the other legacy company of the digital era looks to revitalize itself.