Verizon Communications announced on Tuesday that it has agreed to purchase AOL in a deal worth $4.4 billion (£2.8 billion) to attain its ambitions of growing into advertising and mobile video. The phone company pledged to pay $50 per share in AOL, which was 17% higher than its closing price of $42.59 per share on Monday evening. And as a result of the announcement, the value of AOL shares jumped to $50.70, a bit above the price offered by Verizon.
The acquisition is hoped to help Verizon set up its 4G video service on mobile devices, since it will have access to the technology developed by AOL for high-quality video and selling online advertisements. The service is expected to be released this summer as part of a wider attempt to compete with providers like AT&T to attract consumers. Few details have been released concerning the mobile video service, but Fran Shanmo, Verizon CEO, has said that it will offer a range of free, ad-supported and paid content, but that it will not seek to copy traditional TV. Tim Armstrong, AOL CEO is set to stay if the deal obtains approval from regulators to go through. Verizon has said it plans to finance the deal through commercial paper and cash.