AOL Mulled Joint Venture, Split, Three Bids Before Verizon Deal

AOL Inc.’s board, spurred by a joint venture proposal from Verizon Communications Inc., began last December considering options including a breakup and acquisition bids from three unnamed parties.

Verizon’s proposal for a joint venture built around mobile content and advertising systems for a planned streaming TV service ultimately led AOL’s directors earlier this month to accept Verizon’s $4.4 billion takeover offer.

The AOL board, during its deliberations, discovered from executives that the company’s standalone strategy and expansion costs would be “challenging,” and in December authorized a search for alternatives, according to documents filed Tuesday with regulators. The company also began to explore whether stockholder value could be created through the sale or divestiture of AOL’s assets, including by spinning off a newly formed subsidiary to its investors, according to the filing.

Over the next five months, three unnamed parties including a private equity firm expressed interest in a variety of deals, the documents show.

On May 8, Verizon offered to pay $47 a share for all of AOL. Later that day Verizon made what it called a final offer and increased the price to $50 a share. AOL’s shares closed May 8 at $43.42.

On May 11, the two companies announced the deal with Verizon gaining AOL’s exclusive video and its ability to automatically send ads to mobile devices.

AOL Chief Executive Officer Tim Armstrong said he would stay on with the combined company for more than three years. Armstrong could collect more than $200 million in pay based on AOL shares and other compensation.

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