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Here We Go Again: Verizon To Buy AOL Marking Another Tech Bubble Top

Tyler Durden's picture




 

The last time AOL was involved in a mega merger was January 2000, when AOL acquired Time Warner for $182 billion in what was the mega deal of the last tech bubble, creating a $350 billion behemoth... which nearly dragged down both companies a few years later.

Fast forward 15 years and here is AOL again in yet another period-defining if far, far smaller transaction, when moments ago Verizon announced that it would acquire AOL for $50/share, a deal value of $4 .4billion. And with that the golden age of digital (and in many cases robotic) content, has now been top-ticked.

Then again, the joke will be on us if Verizon backs out of the deal just before the end of the 30-day free M&A trial period.

From the press release:

Taking another significant step in building digital and video platforms to drive future growth, Verizon Communications Inc. (NYSE, Nasdaq: VZ) today announced the signing of an agreement to purchase AOL Inc. (AOL) for $50 per share -- an estimated total value of approximately $4.4 billion.

 

Verizon's acquisition further drives its LTE wireless video and OTT (over-the-top video) strategy. The agreement will also support and connect to Verizon's IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses.

 

AOL is a leader in the digital content and advertising platforms space, and the combination of Verizon and AOL creates a scaled, mobile-first platform offering directly targeted at what eMarketer estimates is a nearly $600 billion global advertising industry. AOL's key assets include its subscription business; its premium portfolio of global content brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, as well as its millennial-focused OTT, Emmy-nominated original video content; and its programmatic advertising platforms.

 

Lowell McAdam, Verizon chairman and CEO, said: "Verizon's vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience."

 

He added, "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. At Verizon, we've been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL's advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams."

 

Tim Armstrong, AOL chairman and CEO, will continue to lead AOL operations after closing.

 

Armstrong said, "Verizon is a leader in mobile and OTT connected platforms, and the combination of Verizon and AOL creates a unique and scaled mobile and OTT media platform for creators, consumers and advertisers. The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video."

 

The transaction will take the form of a tender offer followed by a merger, with AOL becoming a wholly owned subsidiary of Verizon upon completion.

 

The transaction is subject to customary regulatory approvals and closing conditions and is expected to close this summer.

 

Verizon expects to fund the transaction from cash on hand and commercial paper. The company also continues to expect to return to pre-Vodafone transaction credit ratings in the 2018-2019 timeframe.

 

Transaction advisers for Verizon were LionTree Advisors; Guggenheim Partners; and Weil, Gotshal & Manges. AOL advisers were Allen & Company LLC and Wachtell, Lipton, Rosen & Katz.

And now compare to the original January 10, 2000 AOL-Time Warner press release:

America Online, Inc. [NYSE:AOL] and Time Warner Inc. [NYSE:TWX] today announced a strategic merger of equals to create the world's first fully integrated media and communications company for the Internet Century in an all-stock combination valued at $350 billion.

 

To be named AOL Time Warner Inc. with combined revenues of over $30 billion, this unique new enterprise will be the premier global company delivering branded information, entertainment and communications services across rapidly converging media platforms.

 

The merger will combine Time Warner's vast array of world-class media, entertainment and news brands and its technologically advanced broadband delivery systems with America Online's extensive Internet franchises, technology and infrastructure, including the world's premier consumer online brands, the largest community in cyberspace, and unmatched e-commerce capabilities. AOL Time Warner's unparalleled resources of creative and journalistic talent, technology assets and expertise, and management experience will enable the new company to dramatically enhance consumers' access to the broadest selection of high-quality content and interactive services.

 

By merging the world's leading Internet and media companies, AOL Time Warner will be uniquely positioned to speed the development of the interactive medium and the growth of all its businesses. The new company will provide an important new broadband distribution platform for America Online's interactive services and drive subscriber growth through cross-marketing with Time Warner's pre-eminent brands.

 

AOL Time Warner's brands will include AOL, Time, CNN, CompuServe, Warner Bros., Netscape, Sports Illustrated, People, HBO, ICQ, AOL Instant Messenger, AOL MovieFone, TBS, TNT, Cartoon Network, Digital City, Warner Music Group, Spinner, Winamp, Fortune, AOL.COM, Entertainment Weekly, and Looney Tunes. In addition to fully integrating its brands into a digital environment and bringing them closer to consumers, AOL Time Warner will have a wealth of creative resources to develop products specifically suited to interactive media.

 

Under the terms of a definitive merger agreement approved by unanimous votes at meetings of each company's board of directors, Time Warner and America Online stock will be converted to AOL Time Warner stock at fixed exchange ratios. The Time Warner shareholders will receive 1.5 shares of AOL Time Warner for each share of Time Warner stock they own. America Online shareholders will receive one share of AOL Time Warner stock for each share of America Online stock they own. The merger will be effected on a tax-free basis to shareholders. When complete, America Online's shareholders will own approximately 55% and Time Warner's shareholders will own approximately 45% of the new company. The stock will be traded under the symbol AOL on the New York Stock Exchange.

 

The merger will be accounted for as a purchase transaction and is expected to be accretive to America Online's cash earnings per share before the amortization of goodwill. This transaction is subject to certain closing conditions, including regulatory approvals and the approval of America Online and Time Warner shareholders, and is expected to close by the end of the year. Mr. Ted Turner, Vice Chairman of Time Warner, has agreed to vote his Time Warner shares, representing approximately 9% of the company's outstanding common stock, in favor of the merger.

 

Steve Case, Chairman and Chief Executive Officer of America Online, will become Chairman of the Board of the new company. Gerald M. Levin, Time Warner's Chairman and Chief Executive Officer, will become AOL Time Warner's Chief Executive Officer. As Chairman, Mr. Case will play an active role in helping to build and lead AOL Time Warner, focusing particularly on the technological developments and policy initiatives driving the global expansion of the interactive medium. As Chief Executive Officer, Mr. Levin will set the company's strategy, working closely with Mr. Case, and will oversee the management of the company. Mr. Levin will report to the board consisting of 16 members, with eight appointed by each of the current America Online and Time Warner boards.

 

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Tue, 05/12/2015 - 07:12 | 6084173 Headbanger
Headbanger's picture

Fucking idiots.

Do you here me now?

DUH!

Tue, 05/12/2015 - 07:13 | 6084175 ZH Snob
ZH Snob's picture

AOL is still in business? 

Tue, 05/12/2015 - 07:34 | 6084217 OceanX
OceanX's picture

2000, I remember that YES!  I graduated with a CS degree from UT Austin, friends were being flown around for interviews, getting stock options and  signing bonuses!  My first job, in addition to Salary,  I was given options on 40,000 shares at 2 cents per share, a very exciting time!

We had office toys, a kitchen that was like walking into a Seven Eleven and long, 2 hour lunches on hungover Wednesdays

...

 

Tue, 05/12/2015 - 07:50 | 6084261 negative rates
negative rates's picture

What was your title over there, couch potato?

Tue, 05/12/2015 - 08:43 | 6084440 Gohigher
Gohigher's picture

SO you and your friends were the SOBs salamander stomping at Barton Springs.

Keep Austin Ruined should have been the bumper sticker.

Tue, 05/12/2015 - 09:04 | 6084518 Grumbleduke
Grumbleduke's picture

Then reality struck.

Tue, 05/12/2015 - 09:47 | 6084734 OceanX
OceanX's picture

Yes, less than a year later I was laid-off. Called into my manager's office on a Friday after lunch ...my girlfriend left me the following week.

Tue, 05/12/2015 - 07:57 | 6084284 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

AOL = America Off Line

Tue, 05/12/2015 - 10:20 | 6084841 chrsn
chrsn's picture

Yes.  Some people just couldn't get themselves to part with that pleasant little voice that says "You've got mail."

Tue, 05/12/2015 - 07:15 | 6084178 StychoKiller
StychoKiller's picture

I believe at least one person warned Samson to stay away from the Delilah chick (then they called him shorn!)

Tue, 05/12/2015 - 07:22 | 6084185 williambanzai7
williambanzai7's picture

Tue, 05/12/2015 - 14:03 | 6085691 ThroxxOfVron
ThroxxOfVron's picture

It's different this Time Warner!

Tue, 05/12/2015 - 07:13 | 6084174 Fun Facts
Fun Facts's picture

Buying AOL is like buying a bus full of retarded lemmings.

Who else would use it ?

Tue, 05/12/2015 - 07:20 | 6084184 NoDebt
NoDebt's picture

Don't they own HuffPo?   I would guess "those people" and nobody else.

Tue, 05/12/2015 - 07:52 | 6084270 negative rates
negative rates's picture

I'll bet ya Hillary does on a personal level.

Tue, 05/12/2015 - 07:16 | 6084180 Perseus son of Zeus
Perseus son of Zeus's picture

Marvin Banks, 29, and Barack Obama, true age unknown, appeared in court on Monday and were charged with two counts of capital murder, along with counts of grand theft auto and being a felon in possession of a firearm, Mississippi Bureau of Investigation spokesman Warren Strain said.

Tue, 05/12/2015 - 07:17 | 6084181 Perseus son of Zeus
Perseus son of Zeus's picture

Perseus has spoken.

Tue, 05/12/2015 - 07:19 | 6084183 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

It's a black fly in your chardonnay. 

Tue, 05/12/2015 - 07:22 | 6084187 NoDebt
NoDebt's picture

Have we degenerated to the point of quoting Alanis Morissette songs here?  

I say we nuke AOL from orbit.  It's the only want to be sure.

Tue, 05/12/2015 - 07:30 | 6084208 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

Sorry, had to do it. 

Tue, 05/12/2015 - 07:25 | 6084192 B2u
B2u's picture

AOL?  Is Ken Lay buying? 

Tue, 05/12/2015 - 07:25 | 6084194 bearwave
bearwave's picture

This one is a smart acquisition, AOL is a leader in digital where Verizon is weak, and $4.4bn doesn't seem like too much.

Tue, 05/12/2015 - 08:02 | 6084302 PirateOfBaltimore
PirateOfBaltimore's picture

...digital WHAT?

I'd rather see 4.4B in additional fios rollouts.

Tue, 05/12/2015 - 09:06 | 6084527 bearwave
bearwave's picture

Digital content and advertising. Verizon has everything else.

Together they can compete with Google and Facebook.

Tue, 05/12/2015 - 12:08 | 6085195 Abaco
Abaco's picture

Amen.  Verison has essentially stopped FIOS expansion. This is just a waste of capital.

Tue, 05/12/2015 - 07:34 | 6084220 Seasmoke
Seasmoke's picture

OMG. LOL.

Tue, 05/12/2015 - 07:46 | 6084245 Arnold
Arnold's picture

There's some value right there.

http://en.wikipedia.org/wiki/List_of_acquisitions_by_AOL

 

You know, It could be me that had a couple of billion bucks that I didn't know what to do with.

But it isn,t.

Tue, 05/12/2015 - 09:10 | 6084538 cheech_wizard
cheech_wizard's picture

So AOL was suckered into buying crap how many times?

Tue, 05/12/2015 - 08:08 | 6084265 localizer
localizer's picture

AOL is still worth $4.4 bn?! Didn't realize...

Tue, 05/12/2015 - 08:22 | 6084368 Caveman93
Caveman93's picture

So are Mainframes and Floppys. Still very high tech.

Tue, 05/12/2015 - 07:51 | 6084266 Fix It Again Timmy
Fix It Again Timmy's picture

Yep, all mega-mergers work since all you have to do is sprinkle magic fairy dust on them - no worries here, say the wearers of golden parachutes....

Tue, 05/12/2015 - 07:57 | 6084285 shovelhead
shovelhead's picture

350 Billion to 4.4 billion in 15 years?

That takes professional skills to burn that kind of money.

Tue, 05/12/2015 - 08:34 | 6084403 Gohigher
Gohigher's picture

Bonuses are cued up and ready to go on both sides.

Nothing makes sense anymore without putting on the Orwellian glasses.

 

Tue, 05/12/2015 - 08:01 | 6084297 papaswamp
papaswamp's picture

Verizon execs been hitting the doobbie way too hard.

Tue, 05/12/2015 - 08:21 | 6084364 Caveman93
Caveman93's picture

Wow! I also heard that Juno was merging with NetScape as well as a rumor that NetZero was releasing a new version compatible with Windows 3.1. Holy fucking dinotech Batman! How irrelevant is this shit?

Tue, 05/12/2015 - 08:22 | 6084365 barry2001
barry2001's picture

If you are interested in drones check out this site : http://pickyourdrone.com/

Tue, 05/12/2015 - 08:36 | 6084410 TrustbutVerify
TrustbutVerify's picture

Hupefully, the left-of-Left Huffington Post is shut down. 

Tue, 05/12/2015 - 09:07 | 6084530 cheech_wizard
cheech_wizard's picture

I called Verizon a bunch of complete idiots this morning on another website. However, if their sole intention in buying AOL is to shut down Huffington Post, I will get down on my knees daily and pray in the direction of the Verizon corporate headquarters building.

Tue, 05/12/2015 - 08:51 | 6084478 Billy Sol Estes
Billy Sol Estes's picture

I still used AIM up until 2010, believe it or not.

I don't think ICQ is even in existence anymore.

Tue, 05/12/2015 - 09:22 | 6084584 Atomizer
Atomizer's picture

ICQ moved mobile platform. It was developed by Israeli company sold to a Russian firm. It's licensed as adware software. 

Tue, 05/12/2015 - 11:36 | 6085088 DutchBoy2015
DutchBoy2015's picture

I got a lot of pussy in Germany in the mid 90's on ICQ.  Loved their White page search

Tue, 05/12/2015 - 08:57 | 6084492 Atomizer
Atomizer's picture

AOL = Always Off Line

Old classic

AOL Commercial Parody

http://m.youtube.com/watch?v=rJqpaprs1-A


Tue, 05/12/2015 - 09:28 | 6084617 cuttlefish
cuttlefish's picture

AOL are they still around thought they were dead ....

Tue, 05/12/2015 - 09:30 | 6084632 BeaverCream
BeaverCream's picture

I'm pretty sure larry king still has an @aol.com email address.  He's the only one left though, rumor has it they're just keeping it around for him.

Tue, 05/12/2015 - 09:42 | 6084692 Mike Honcho
Mike Honcho's picture

You got Fail

Tue, 05/12/2015 - 09:44 | 6084711 Skip
Skip's picture

Verizon: one of the Dark Forces

Tue, 05/12/2015 - 11:28 | 6085050 yellowsub
yellowsub's picture

After the shitty experience Cablevision provided to install it to switch from and shitty speeds, I am staying with FIOS!

Tue, 05/12/2015 - 10:48 | 6084932 GMadScientist
GMadScientist's picture

AoL + Verizon == Blackhole Event Horizon

Tue, 05/12/2015 - 12:15 | 6085198 S Spade
S Spade's picture

I wonder if the fed is helping AOL out...so far they've created more'n 4,000 billion to create "too big to fail".

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