In an effort to put more original content on its network — and ad revenue in its pockets — AOL announced today that it will be purchasing popular news and opinion site HuffingtonPost.com for a princely sum of around $315 million.
The offer includes about $300 million in cash and the deal will likely be completed late in the first quarter or early in the second, New York-based AOL said in a statement today. Co- founder Arianna Huffington, 60, will become president and editor-in-chief of the Huffington Post Media Group, which will include all Huffington Post and AOL content.
Analysts are curious as to why AOL paid so much for a site that, while having a very large readership, has only recently begun to show signs of long-term profitability.
The move comes at a hefty premium. AOL is estimated to pay 32 times earnings before interest, taxes, depreciation and amortization for the Huffington Post, said Benchmark Co analyst Clayton Moran.
Similar content deals, such as Hellman & Friedman’s acquisition of Internet Brands in September 2010, typically go for eight to 12 times earnings, said Moran.
“AOL just spent 40 percent of their cash for very little near-term return,” said Moran.
It will be interesting to see how nicely the fiercely independent Huffington plays with her new chat-room-loving overlords.