AOL (AOL) today filed documents with the SEC that included background on its pending $4.4 billion acquisitio n by Verizon (VZ). Among the revelations were that AOL entered into confidentiality agreements with three other potential acquirors, including a private equity firm.
In the filing, AOL says that “members of Verizon’s management team” contacted AOL chairman and CEO Tim Armstrong last July “to discuss potential collaborative opportunities between the companies.” Armstrong sat down with Verizon chairman and CEO Lowell McAdam at Allen & Co.’s Sun Valley conference that month to begin talks, even though media reports emanating from the event instead focused on Armstrong’s private chat with Yahoo (YHOO) boss Marissa Mayer.
The two companies discussed a variety of different possibilities — including a joint venture or commercial partnership — and entered into a confidentiality agreement in November 2014. At the time, Verizon said it had no interest in acquiring AOL as a whole, and reiterated that position in subsequent January meetings that focused on a joint venture involving AOL’s “platforms assets and certain brands assets.”
At the time, AOL also had held “preliminary discussions” with a third party “regarding a potential transaction involving all or a part of [AOL’s] businesses.” In February, a different third party reached out to receive information about AOL’s platforms and brands businesses. One month later, a private equity firm reached out for the same reason. AOL would eventually enter into confidentiality agreements with all three of the non-Verizon suitors.
By mid-April, however, the two strategic third parties had bailed. Verizon began floating the idea of a 100% acquisition of AOL and, on April 22, submitted a draft merger agreement. On May 4, the private equity firm submitted an offer to purchase certain AOL assets, although the filing does not specify which assets were requested.
On May 8, Verizon submitted a formal takeover bid at $47 per share in cash. AOL, which had told Verizon that it expected an offer “in the $50s,” requested a price increase. Verizon countered at $50 per share, and said that there was “no further room for negotiation with respect to the offer price… if this price was not of interest, Verizon was prepared to withdraw its offer.”
Armstrong again asked Verizon to increase the offer on a May 9 phone call, but Verizon didn’t budge. Instead, the two sides negotiated largely over the proposed deal’s termination fee. AOL’s board unanimously approved the $50 per share deal on May 11, and the deal was announced the following morning. The filing does not make additional mention of the private equity firm.
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