The move comes at a hefty premium. AOL is estimated to pay 32 times earnings before interest, taxes, depreciation and amortisation for the Huffington Post, said Benchmark Co analyst Clayton Moran. Similar content deals typically go for eight to 12 times earnings, Mr Moran said.
“AOL just spent 40 per cent of their cash for very little near-term return,” he added.
The deal, which sent AOL shares up slightly after they fell as much as four per cent in trade yesterday, will create a media group that will have a combined base of 117 million visitors a month in the United States, and reach 270 million people globally, AOL said in a statement.
Arianna Huffington, co-founder of The Huffington Post, will lead a newly formed The Huffington Post Media Group, which will integrate all Huffington Post and AOL content, as its president and editor-in-chief.
“I want to stay forever,” Ms Huffington said. “I want this to be my last act.”
The Huffington Post, started in 2005, has grown into one of the most heavily visited news websites in the United States.
The deal is the latest move by Tim Armstrong, who is chief executive of AOL, to rescue the dial-up Internet access business by turning it into a media and entertainment destination.