Verizon to Buy AOL for $4.4 Billion

By Mike Shields and Thomas Gryta for The Wall Street Journal

Verizon Communications Inc. 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.

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.

The service will feature shorter snippets rather than 30 or 60 minute shows. It also could include multicast programming—a sort of broadcast service that uses cellular airwaves—for delivering live content like sports and concerts, along with on-demand viewing.

This is an excerpt. Click here to read the full article in The Wall Street Journal.