By now you’ve probably heard that Verizon, America’s biggest wireless company, is buying AOL, the ’90s era internet giant that owns media brands like the Huffington Post and some very modern online advertising technologies. (AOL amazingly also still has millions of dialup internet subscribers.)
But you probably didn’t know that there’s is quite an interesting backstory to this deal, and fresh filings today with US regulators have shed further light on the process.
Back in January, Bloomberg reported that Verizon had been in discussions with AOL about a potential takeover or joint venture. CEOs from both companies basically denied this report, at least the acquisition aspect of it. AOL’s CEO Tim Armstrong described it as “rumors,” while Verizon’s Lowell McAdam said it was “really not accurate.” Just a few months later, the deal had been consummated. Make of that what you like.
The filing reveals that AOL and Verizon had been in discussions about “collaborative opportunities” as far back as July 2014, when the two CEOs met at the annual media industry get together in Sun Valley, Idaho. By November, they’d signed a confidentiality agreement ”to facilitate ongoing discussions” about commercial partnerships. By January, just after the Bloomberg report surfaced, the talks had progressed to meetings about both companies contributing assets into a “potential joint venture” in internet video. Importantly, during those meetings, the filing claims “Verizon reiterated that they were not interested in acquiring [AOL] as a whole.”
It wasn’t until April that Verizon started talking to AOL about an acquisition of the business in its entirety, the filing says. The two companies spent the better part of the next month haggling over price (they settled on $50 per share, which valued AOL at about $4.4 billion).
There are plenty of other juicy details in the filing. As first spotted by Re/Code, three other unnamed companies approached AOL since December of last year about possible deals for parts of its business. One AOL shareholder, Starboard Value, had been pushing since late 2014 for the company to combine with Yahoo, an idea that has been discussed on Wall Street for years. And it shows that Armstrong, who is staying on as a senior member of Verizon’s executive team, and already benefited from the large chunk of stock he owns in AOL, was awarded a special, restricted stock bonus (“Founders’ Incentive Award”) worth 1.5% of the company’s value, or $59 million.
If there is any lesson from all of this, it’s probably that negotiating billion-dollar corporate transactions is a complex and painstaking process. Keeping them private is almost as hard.