Why Verizon Is Buying AOL, and Why AOL Is Happy to Sell

NEW YORK ( TheStreet) -- Verizon (VZ) on Tuesday said it will acquire  AOL (AOL) in a $4.4 billion deal that will combine the country's largest broadband network with an Internet-content company that is developing one of the world's top automated advertising platforms.

If regulators approve the deal, Verizon would be taking its most significant step yet to leverage its broadband network apart from selling pay-TV and telephone services. In effect, it will become more like its chief rival, cable giant Comcast (CMCSA), which owns NBC/Universal. 

Shares of New York-based AOL were surging 19% to $50.65 while Verizon was slipping 0.4% to $49.58.

The deal comes four months after Verizon CEO Lowell McAdam discounted a Bloomberg News report about a possible deal  between the two companies.

Verizon stands to gain from AOL's ad-technology platform, which enables buying and selling video and banner headline advertising in real time across hundreds, if not thousands, of Web sites. The platform, known as ONE by AOL, is rivaled by only Google (GOOG), Barry Lowenthal, president of the Media Kitchen, a New York media agency owned by Kirshenbaum Bond Senecal + Partners, said in January.

For AOL, the deal is a crowning achievement for CEO Tim Armstrong who took over the company in 2009 after AOL was spun off from Time Warner (TWX). Expectations have been high, and Armstrong has had his stumbles, most notably the failed effort to create a hyper-local news site called Patch and then sell advertising on it.

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