AOL snaps up Huffington Post as fallen giant begins turnaround
AOL chief executive Tim Armstrong has led a series of acquisitions to change the fortunes of the company, which has been losing customers who used it to connect to the internet.
Armstrong has been turning the company into a supplier of online content in an attempt to boost its advertising revenue.
The combined media group will have 117 million visitors a month in the US and 270 million globally, making it an enticing platform for advertisers.
Armstrong, a former executive at Google, was brought in to turn around AOL during April 2009, when it was still part of Time Warner. While acquiring one of the top ten news websites in the world will help to boost advertising revenue, analysts said an even more important step was adding Huffington Post co-founder Arianna Huffington to its management team.
Huffington, who is a regular media pundit and political commentator in the US, will run AOL's growing array of content.
Technology analyst Rob Enderle said: "The price that AOL is paying is really just the hiring fee to get Arianna.
"This is one of those out-of-left-field moves that actually makes a lot of sense. This could put AOL back on the map."
But putting Huffington into a position of power could eventually threaten Armstrong's job security if AOL continues to struggle, Enderle added. He said: "This is a gutsy move on Armstrong's part because Arianna could end up running AOL."
Some $300m of the deal will be paid out of AOL's existing cash reserves, with the remainder coming through shares. Huffington and her co-founder, Kenneth Lerer, will pocket the lion's share of the cash.
Huffington praised Armstrong's vision for AOL and said they were on the same page as they discussed their ambitions for online news. She added: "We were practically finishing each other's sentences."
Huffington said the deal was signed at Sunday's Super Bowl in Dallas, which she and Armstrong attended. If it wins regulatory approval as expected, the deal would probably close in late March or early April.
She added: "My New Year's resolution was to take HuffPost to the next level - not just incrementally, but exponentially. Far from changing our editorial approach, this moment will be for HuffPost like stepping off a fast-moving train and on to a supersonic jet.
"We're still travelling toward the same destination, with the same people at the wheel but we're now going to get there much, much faster."
Armstrong is also believed to have held talks with private equity firms about buying Yahoo, another struggling internet pioneer.But Yahoo chief executive Carol Bartz has shown little interest in working with AOL.