Investors think a bidding war is going to erupt over AOL, and that Verizon's $4.4 billion won't be enough

Verizon guy paul marcarelli iphoneYouTube/VerizonCan you hear me now, Tim?

This morning, AOL announced that it has accepted Verizon’s $US50 per share acquisition offer.

Normally, investors would react to that kind of news by buying up AOL stock until its price was just under $US50 per share.

That’s not what happened today.

Right now, AOL share price is above $US50 — at $US50.57.

Why?

We asked a bunch of people close to the company, investment bankers, and hedge fund traders.

The consensus speculation is that traders are betting that another bidder for AOL is going to emerge, and offer a price that’s higher than $US50 per share.

Who are these potential suitors?

These are the names people tossed at us: Time Warner (!), Comcast, Yahoo, Alibaba, Softbank, AT&T. One trader source even mentioned Netflix and Apple.

There are two reasons why traders think so many companies should want to buy AOL:

  • The first is that cable companies and telecoms are going to have to figure out how to make money off of mobile video, and that AOL’s advertising technology can help solve that problem. Also, maybe AOL’s subscribers paying for Internet access could easily be converted into video content subscribers.
  • The second: the news that AOL is in talks to spin off Huffington Post at a $US1 billion valuation have some people believing that AOL would be worth more than $US4.4 billion if it were acquired and then broken up.

One dealmaking source we talked to thinks investors betting on AOL finding a higher bidder are fooling themselves.

This source says that late, surprise bidders normally only appear after companies that were not thought to be for sale announce their sale.

This source says AOL has been on the block for a long time, and that if another bidder was going to emerge, it already would have.

“Often times in situations like this, the arbitrage community gets ahead of itself. My guess is that’s probably the case.”

“I can’t believe someone is going to go, ‘Oh geez, didn’t know it was for sale.'”

Jon Marino contributed additional reporting to this story.

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