Daily Management Review

Yahoo’s Core Business to be bought by Verizon for $4.83 Billion


07/25/2016




Yahoo’s Core Business to be bought by Verizon for $4.83 Billion
With the aim to expand its digital advertising and media business, ending a lengthy sale process for the fading Web pioneer, Verizon Communications Inc said on Monday it would buy Yahoo Inc's core internet properties for $4.83 billion in cash.
 
As Verizon gains access to Yahoo's ad technology tools, BrightRoll and Flurry, and search, mail and messenger assets, the purchase will boost Verizon's AOL internet business, which it bought last year for $4.4 billion.
 
"Yahoo gives us scale that is what is most critical here. We want to compete and that is the place we need to be”, Marni Walden, who is head of product innovation and new business at Verizon told CNBC. Walden added that the company's audience will go from the millions to the billions.
 
While Walden, who will head the combined company, told CNBC the new leadership team has yet to be determined, Yahoo Chief Executive Officer Marissa Mayer said in a Tumblr blog post that she planned to stay at Yahoo.
 
"It's a decade of mismanagement that has finally ended for Yahoo. It's the continuation of an extension of Verizon's strategy toward becoming a wireless internet player and a move away from (telecom) regulation for Verizon into an unregulated growth industry," said Recon Analytics analyst Roger Entner.
 
The deal leaves Yahoo with a 15 percent stake in Chinese e-commerce company Alibaba Group Holding Ltd and a 35.5 percent interest in Yahoo Japan Corp and marks the end of Yahoo as an operating company. The deal is expected to close in early 2017.
 
Mobile video and advertising is the new focus for Verizon for new sources of revenue in an oversaturated wireless market. It is the No. 1 U.S. wireless operator. Its Fios TV and internet service have also been scaled back.
 
To create data to help advertisers specifically target users based on online behavior and preferences, Verizon could combine data from AOL and Yahoo users in addition to its more than 100 million wireless customers.
 
The companies said that until the deal receives shareholder and regulatory approvals, Yahoo will continue as an independent company.
 
Shares in Yahoo Japan, Yahoo's convertible notes, certain minority investments or Yahoo's non-core patents, Yahoo's cash and its shares in Chinese e-commerce giant Alibaba Group Holding Ltd aren’t included in the sale.
 
While Yahoo had a market value of about $37.4 billion as of Friday's close, the Alibaba and Yahoo Japan investments are worth about $40 billion in terms of their market capitalizations.
 
Private equity firm TPG Capital Management LP, a consortium of buyout firms Vector Capital and Sycamore Partners and AT&T Inc; a group led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett were the competitors of Verizon in its bidding for Yahoo.
 
The deal's price tag was largely in line with expectations at $5 billion, said Analysts at Mizuhou.
 
Yahoo launched an auction of its core business in February after shelving plans to spin off its stake in Alibaba under pressure from activist investor Starboard Value LP. While shares of Yahoo dipped about 1 percent at $39.12, shares of Verizon were up 0.6 percent at $56.41 in premarket trading.
 
(Surce:www.reuters.com) 






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