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Huffington Post agrees to $315 million buyout from AOL

By Paul Farhi
Washington Post Staff Writer
Monday, February 7, 2011; 5:59 PM

Huffington Post, the liberal-leaning online news site that has been one of the Internet's start-up success stories, said it agreed to a $315 million buyout late Sunday night from AOL Inc., the elder statesman of online access and digital content.

Huffington Post founder Arianna Huffington, who made the announcement on her site Sunday night, will become president and editor in chief the Huffington Post Media Group, which will put the news outlet she co-founded under the same ownership as AOL's collection of sites. Huffington - the former wife of one-time Republican Senate candidate Michael Huffington - has evolved into a well-known pundit and author and is a powerful player in Democratic circles as a result of her venture.

In a stroke, AOL greatly expands its content offerings and reach on the Internet, part of its strategy to move away from selling the dial-up service that gave millions of Americans their first online experiences but that is now in grave decline.

Huffington Post reaches more than 20 million unique visitors each month, making it one of the most popular news and commentary sites on the Internet. It is based in New York City, as is AOL.

Huffington and Huffington Post chairman Kenneth Lerer co-founded the site in 2005 and presided over its rapid growth. "HuffPo" said it turned a profit in 2010, but as a private company, it does not publicly report its sales and earnings. Lerer will be stepping down as chairman.

The companies said Sunday that about $300 million of the sale price will be in cash, with the balance in AOL stock - a spectacular return for Huffington Post, which was founded on a $1 million investment less than six years ago. It is privately owned by its two co-founders as well as a group of investors.

AOL, which began in the Washington area but long ago moved its headquarters to New York, has been gradually moving out of its deflating Internet-access business and transforming itself into an online content machine. In addition to its eponymous Web site, AOL owns a series of well-known digital brands, including Mapquest, Politics Daily, the pop-culture news site PopEater, movie-news and ticket reservation service Moviefone, and the tech-news and review sites Engadget and TechCrunch. It also owns Patch, a network of "hyper-local" news sites covering dozens of communities across the country, including several in the Washington area.

But AOL continues to decline as its access business shrinks and its content strategy ramps up. During the fourth quarter, its overall revenue fell 26 percent to $596 million, with advertising sales off 29 percent to $332 million. It is now an independent company, having unwound an ill-fated merger with Time Warner in 2000. AOL formally separated from Time Warner in 2009.

All told, the new group said it will have a combined base of 117 million unique visitors a month in the U.S. and 270 million around the world.

Huffington indicated in a posting that the merger came together quickly. AOL chairman and chief executive Tim Armstrong e-mailed her last month "saying he had something he wanted to discuss with me, and asking when we could meet." The next day over lunch at Huffington's house in Los Angeles, Armstrong and Arthur Minson, AOL's chief financial officer, offered to buy Huffington Post.

The deal was signed on Sunday at the Super Bowl in Dallas, where Huffington and Armstrong met again.

"The Huffington Post will continue on the same path we have been on for the last six years - though now at light speed - by combining with AOL," she wrote. "We are fusing a legendary and powerful new media brand with a vibrant, innovative news organization."

The merger will put the Huffington Post into local journalism via Patch and expand its video offerings via AOL's video studios in New York and Los Angeles.

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