AMERICAN telecoms giant Verizon is to buy internet pioneer AOL for $4.4 billion (£2.8bn), in a mega-deal that will give the group a foothold in the online video sector.
That sector is seen as a burgeoning industry, targeting an advertising market estimated to be worth nearly $600bn (£380bn).
Verizon is also seeking to bolster its “internet of things” platforms – which tap into the latest technology meaning household appliances can be controlled through the touch of a mobile device. AOL owns websites including Engadget, The Huffington Post and TechCrunch.
Verizon said it would pay $50 per share for the company in cash, a 15 per cent premium to AOL’s closing price at the close of trading on Wall Street on Monday.
Lowell McAdam, Verizon chairman and chief executive, said: “Verizon’s vision is to provide customers with a premium digital experience based on a global multi-screen network platform.
“This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.
“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.”
The deal, subject to regulatory approval, is set to complete this summer. AOL boss Tim Armstrong will continue to lead its operations.
One telecoms analyst said: “This is a good deal, and the premium being paid, while decent, is not top-dollar. It looks a good strategic move that opens up options for Verizon.
“Buying AOL will broaden the amount of advertising Verizon can sell and will boost its video production.”
Yesterday’s blockbuster transaction comes 14 years after AOL’s ill-fated $182bn takeover of TV, film and publishing conglomerate Time Warner, in what was the biggest and what turned out to be most disastrous deal of the dotcom boom.
By 2009 it had completely unravelled and the companies went their separate ways. AOL’s value plunged as the global economic slowdown eroded advertising revenue.
The latest move comes after Verizon, America’s largest mobile firm as well as an internet and television provider, last month said it was preparing to launch a video service targeting mobile devices and was seeking partners to deliver the content. Its name will be familiar to UK investors after mobiles phones giant Vodafone last year sold its 45 per cent stake in joint venture Verizon Wireless to Verizon in a $130bn cash and shares deal.
AOL, famous for posting compact discs for its services through thousands of letterboxes in the 1990s, still has two million customers for its slower dial-up internet service.
It also became memorable for its messaging service, which would cheerfully announce “you’ve got mail!”.