Global web services company, AOL Inc. (NYSE: AOL) said that it plans to acquire online news website Huffington Post for $315 million, in an attempt to turn its business around and become a top producer of news, entertainment, and other digital content.
AOL’s revenues from the U.S. has declined from $152 million in Q4 2009 to $140 million in Q4 2010, in spite of a general revival of the U.S. online advertising industry, which grew from $5.5 billion in Q3 2009 to $6.4 billion in Q3 2010, a growth rate of 17%. This indicates that AOL’s market share has been slipping against competitors like Google (Nasdaq: GOOG), Facebook and Yahoo (Nasdaq: YHOO).
AOL, which is struggling to grow, since its spin-off with Time Warner (NYSE: TWX) in December 2009, expects that the acquisition will create a next generation American media company with global reach, that combines content, community and social experiences for consumers, AOL’s CEO Tim Armstrong said.
Huffington Post, founded in 2005, has 25 million visitors in December 2010, and the combined entity will take the total to 117 million visitors a month, a spokesperson at AOL said.
After the acquisition, Huffington Post co-founder Ariana Huffington, will become the president and editor-in-chief of a newly formed group within AOL responsible for integrating content between the two companies in the news, technology, women and other sectors. She will also be heading AOL’s other technology blogs, TechCrunch and Engadget as well its music and Patch local media sites.
Ms. Huffington said in a statement, that “"We are fusing a legendary and powerful new media brand with a vibrant, innovative news organization. By uniting AOL and The Huffington Post, we are creating one of the largest destinations for smart content and community on the Internet”
As per the terms of the deal, $300 million out of the total $315 million will be paid in cash, and is expected to close in the first half of 2011. This acquisition will be the largest acquisition by AOL in recent years. In 2010, AOL has made relatively smaller acquisitions of less than $50 million including StudioNow, TechCrunch, 5Min Media, Thing Labs and Pictela. However, Huffington Post is a major acquisition compared to AOL’s market cap of around $2.3 billion.
