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AOL (AOL) in Talks with Verizon

By: , dated January 6th, 2015

Shares of AOL Inc. (AOL) were trading up +3.51 or +7.85 percent to $48.25 in Tuesday’s premarket, after news broke yesterday after the close of business that the company was in talks with Verizon Communications Inc. (VZN) on a potential takeover or joint venture according to sources knowledgeable on the matter. AOL Inc. stock closed at $44.74, down -0.75 or -1.65 percent in Monday’s regular trading session.

New York City, New York based AOL Inc. was originally founded as Control Video Corporation in 1983, changing its name to America Online in 1991, until 2009 when it changed its name to AOL. The company’s main business is in the development and growth of Internet web sites, digital distribution of products and services, as well as Internet content, which it sells to customers, publishers and advertisers. The company was acquired by Time Warner (TWC) in early 2000 for $125 billion and soon after began losing subscribers to faster connections provided by telephone and cable TV carriers. AOL was subsequently spun off from Time Warner in December of 2009.

Sources, which were not named due to the private nature of the talks, said that Verizon was interested in AOL’s advertising technology and video content. AOL’s advertising technology, which is one of the main attractions for Verizon, consists of the automated buying and selling of online ads.

Also, Verizon would gain access to AOL’s subscriber base and Internet properties such as the Huffington Post, Engadget and TechCrunch. AOL’s media properties, which get more than 200 million unique visitors a month, make AOL the fourth largest Internet conglomerate behind Google (GOOG), Yahoo! (YHOO) and Facebook (FB).

The possible acquisition of AOL by Verizon would give Verizon a chance to compete with rival AT&T Inc. (T), which acquired DirecTV (DTV) in a $48.5 billion deal last year. Verizon’s acquisition of AOL would include AOL’s more than 2.3 million paying subscribers.

Verizon may still face financing difficulties in the possible acquisition, since the company is still paying off debt from its purchase of Vodaphone’s 45 percent stake in Verizon Wireless. In addition, Verizon is involved in the acquisition of wireless spectrum through an auction which began in November.

While AOL ranks fourth in Internet media properties, its video network is the second most popular in the United States after Google’s YouTube. AOL video has more than 100 million unique visitors a month according to data from last November.

Neither company commented on the potential deal, with no formal offer from Verizon and no imminent agreement according to the sources. Last year, Starboard Value LP an activist investor in AOL, suggested that the company might consider a joint venture with Yahoo!

AOL stock is trading in the middle of its yearly range, as of yesterday’s closing price, the company has a valuation of approximately $3.5 billion. Whether Verizon decides to acquire the whole company, or decides on a joint venture, will most likely make the stock appreciate in the long term.

Other News About AOL
AOL to Participate in Citi Internet, Media & Telecommunications Conference
Company will participate in the conference at The Bellagio in Las Vegas on January 7th.
AOL Furthers its Commitment to Investing in Women and Youth and Strengthening Local Communities with Launch of AOL Charitable Foundation
AOL launches a charitable foundation focusing on creating opportunities for women in the tech field.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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