NEW YORK (CNNMoney) — Verizon is buying AOL for $4.4 billion, or about $50 a share, the companies announced Tuesday.
The deal is part of Verizon’s new focus on digital and video platforms, as well as its connected device network, which it calls “Internet of Things,” the telecommunications company said.
AOL, best known in the 90s for its dial-up internet service, now has several media brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com. It boasts nearly $600 million in advertising revenue.
Under the terms of the transaction, AOL will become a subsidy of Verizon. CEO Tim Armstrong will remain in his post after the deal is done.
Armstrong told CNN’s Poppy Harlow that the combination will open new growth opportunities for both AOL and Verizon amid the shift toward mobile devices.
“We were, as a company, essentially very interested in the platform transition to mobile,” said Armstrong. “There is really a platform shift happening in the world.”
The merger, which is subject to regulatory approval, is expected to close sometime this summer.
Armstrong, whose stake in AOL is now worth $83 million, up from $71 million before the deal, said there are no plans for job cuts. Verizon said it would fund the purchase, which will be made as a tender offer to shareholders, with cash on hand an short-term corporate loans.
Shares of AOL jumped 17% to roughly $50 ahead of the opening bell. The stock closed at $42.59 on Monday. Verizon shares were down slightly.
The deal marks a major turning point in the history of AOL, which many had left for dead just a few years ago.
In January of 2000, when the Internet was still relatively young and a large percentage of users depended on dial-up modems, AOL and its stock were flying high. It used that strength to strike a deal for old media company giant Time Warner, the owner of CNN, HBO, Warner Bros., and a number of other units it has since sold off. The deal was eventually judged to be among the worst mergers in corporate history.
AOL made the $182 billion deal with its shares that had become inflated in the Internet stock bubble. But by the time the deal closed in January of 2001, the bubble had burst and the deal was already in trouble. The combined AOL Time Warner ended up reporting a record corporate loss of $99 billion in 2002, due to the reduced value of the company. The conglomerate eventually dumped the AOL unit in 2009, creating a stand-alone company.