Verizon To Acquire AOL For $4 Billion In Cash, Market Reacts

Verizon Communications Inc. will acquire AOL for about $4.4 billion in cash, or roughly $50 per share, the company announced Tuesday, in a deal that will add a significant Web presence to the telecommunications giant. The deal will give Verizon -- the nation's No. 1 wireless company and a leading provider of broadband and TV -- a platform for Web-delivered services such as video and the company's "Internet of Things" initiatives, the company said in a statement.

It also gives Verizon a significant foothold in digital advertising and the world of Web content. AOL is publisher of The Huffington Post, TechCrunch and AOL.com. "This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience," said Verizon CEO Lowell McAdam.

Tim Armstrong, AOL's chairman and CEO, will keep his title after the deal is finalized. "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," Armstrong said in the release.

AOL's stock climbed more than 17 percent after the deal was announced, but Verizon's stock dropped about 2 percent. In 2014, AOL saw a profit of $126 million.

Verizon hopes to dominate the crowded online video marketplace with AOL's advanced technology for selling ads and delivering high-quality Web video, the Wall Street Journal reported. Chief Financial Officer Fran Shammo said last month the video service will include paid, free and ad-supported content, but won't mirror traditional TV. It will reportedly feature short clips rather than 30- or 60-minute shows.