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Verizon Finalizes $4.8 Billion Yahoo Deal

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Verizon plans to announce deal early Monday, ending months of speculation
 
BN-OY909_0718ya_J_20160718155213.jpgENLARGE
Verizon has finalized its $4.8 billion deal for Yahoo that is expected to be announced early Monday. PHOTO: REUTERS
By 
RYAN KNUTSON and
 
DEEPA SEETHARAMAN
Updated July 24, 2016 7:55 p.m. ET

Verizon Communications Inc. has agreed to pay $4.8 billion to acquire Yahoo Inc., according to a person familiar with the matter, ending a drawn-out auction process for the beleaguered internet company.

The price tag, which includes Yahoo’s core internet business and some real estate, is a remarkable fall for the Silicon Valley web pioneer that once had a market capitalization of more than $125 billion at the height of the dot-com boom.

For New York-based Verizon, the deal simply adds another piece to the digital media and advertising business it is trying to build.

The deal is expected to be announced early Monday. The news was earlier reported by Recode and Bloomberg.

Verizon plans to keep the Yahoo brand, according to a person familiar with its plans.

BT-AK028_YAHOO_9U_20160722180906.jpgENLARGE
 

Yahoo’s chief executive, Marissa Mayer, is unlikely to have a prominent role—if any—under Verizon, people familiar with the matter said. She stands to make more than $50 million in compensation if she is terminated as a result of the sale, after earning over $100 million in cash and equity.

When the bidding began in April, Verizon was the immediate front-runner with a market capitalization of roughly $228 billion and a plan for how to plug Yahoo into its upstart digital media business, which includes AOL properties it acquired last year for $4.4 billion.

Verizon’s competition came primarily from private-equity firms such as Bain Capital, Vista Equity Partners, TPG and Advent International Inc., as well as a group led by Quicken Loans founderDan Gilbert. AT&T Inc. joined the bidding process later, but it wasn’t seen as a serious contender, people familiar with the matter said.

Verizon in June submitted a bid of $3 billion, but that didn’t include Yahoo’s real estate and came before last week’s final round of bidding.

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Verizon is building a portfolio of online content and aiming to monetize it via advertising. Its current assets include Huffington Post and TechCrunch, which it acquired in last year’s AOL deal, and its own mobile video app, called go90. Acquiring Yahoo will bring in millions more viewers from Yahoo sites like Finance, Sports and News.

Verizon also hopes to plug data derived from smartphones into AOL, and now Yahoo’s, digital advertising systems, and it is aiming to build a competitor to online advertising giantsFacebook Inc. andAlphabet Inc.’s Google.

But a combined Yahoo and AOL would be far outpaced by its now far-larger rivals.

Google and Facebook will account for more than half of the $69 billion U.S. digital ad market this year, according to estimates by data firm eMarketer. Yahoo’s share is expected to be 3.4%; Verizon properties including AOL hold an even-smaller 1.8% of the market, according to eMarketer.

Yahoo’s hold on the market is also slipping. In 2014, Yahoo generated $2.54 billion in revenue from U.S. digital ads. That is expected to be $2.32 billion in 2016, or 8.7% lower, according to eMarketer.

“The headwinds for all large players not named Google and Facebook are very real,” said Pivotal Research analyst Brian Wieser.“Noticeable growth only has a chance to come with ongoing investment, whether M&A or internal.”

Last week, Yahoo said second-quarter revenue, minus commissions paid to partners for web traffic, fell 19%. This marked the sixth decline in the past seven periods and the steepest slump under Ms. Mayer.

The Sunnyvale, Calif., company also said display ad prices fell 15% year-over-year in the second quarter, while search ad prices fell 8%. During a conference call with analysts, executives said video ad prices were under pressure because of an influx of video ad supply and “uncertainty” around the Yahoo sale process.

Ms. Mayer also struck a different tone. While past calls were focused on growth, Ms. Mayer spent considerable time touting the company’s lower cost structure. Yahoo’s head count has shrunk about 15% this year to 8,800 employees.

“The pace of cost cutting is significant,” wrote Bernstein Research analyst Carlos Kirjner in a July 19 note. “We suspect that there will be a price to be paid in the future for these fast, deep cuts, reflected in lower revenue growth.”

Analysts are divided on the value of Yahoo’s core business. The decline in search revenue prompted Credit Suisse to cut its valuation of Yahoo’s core business to $7 billion, down from $8 billion. But that is more robust than Mr. Kirjner’s estimate of $3.4 billion.

The Verizon deal is the first major step toward unwinding Yahoo. Next up is a trove of about 3,000 patents, which Yahoo is selling in a separate auction, that is expected to fetch more than $1 billion.

The patents date back to Yahoo’s initial public offering in 1996 and cover key areas such as e-commerce, online advertising and search, including its original search technology.

Yahoo also will need to figure out what to do with its stakes in Yahoo Japan Corp., majority-owned by SoftBank Group Corp., and Chinese e-commerce company Alibaba Group Holding Ltd., considered to make up the majority of Yahoo’s roughly $36 billion market value today.

 

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Lala81

Lala81

Hypersonic

? is this inclusive of their stake in alibaba?

Yahoo owns a substantial stake right?

 

 

Verizon plans to announce deal early Monday, ending months of speculation
 
BN-OY909_0718ya_J_20160718155213.jpgENLARGE
Verizon has finalized its $4.8 billion deal for Yahoo that is expected to be announced early Monday. PHOTO: REUTERS
By 
RYAN KNUTSON and
 
DEEPA SEETHARAMAN
Updated July 24, 2016 7:55 p.m. ET

Verizon Communications Inc. has agreed to pay $4.8 billion to acquire Yahoo Inc., according to a person familiar with the matter, ending a drawn-out auction process for the beleaguered internet company.

The price tag, which includes Yahoo’s core internet business and some real estate, is a remarkable fall for the Silicon Valley web pioneer that once had a market capitalization of more than $125 billion at the height of the dot-com boom.

For New York-based Verizon, the deal simply adds another piece to the digital media and advertising business it is trying to build.

The deal is expected to be announced early Monday. The news was earlier reported by Recode and Bloomberg.

Verizon plans to keep the Yahoo brand, according to a person familiar with its plans.

BT-AK028_YAHOO_9U_20160722180906.jpgENLARGE
 

Yahoo’s chief executive, Marissa Mayer, is unlikely to have a prominent role—if any—under Verizon, people familiar with the matter said. She stands to make more than $50 million in compensation if she is terminated as a result of the sale, after earning over $100 million in cash and equity.

 

When the bidding began in April, Verizon was the immediate front-runner with a market capitalization of roughly $228 billion and a plan for how to plug Yahoo into its upstart digital media business, which includes AOL properties it acquired last year for $4.4 billion.

Verizon’s competition came primarily from private-equity firms such as Bain Capital, Vista Equity Partners, TPG and Advent International Inc., as well as a group led by Quicken Loans founderDan Gilbert. AT&T Inc. joined the bidding process later, but it wasn’t seen as a serious contender, people familiar with the matter said.

Verizon in June submitted a bid of $3 billion, but that didn’t include Yahoo’s real estate and came before last week’s final round of bidding.

Advertisement
 

Verizon is building a portfolio of online content and aiming to monetize it via advertising. Its current assets include Huffington Post and TechCrunch, which it acquired in last year’s AOL deal, and its own mobile video app, called go90. Acquiring Yahoo will bring in millions more viewers from Yahoo sites like Finance, Sports and News.

Verizon also hopes to plug data derived from smartphones into AOL, and now Yahoo’s, digital advertising systems, and it is aiming to build a competitor to online advertising giantsFacebook Inc. andAlphabet Inc.’s Google.

But a combined Yahoo and AOL would be far outpaced by its now far-larger rivals.

Google and Facebook will account for more than half of the $69 billion U.S. digital ad market this year, according to estimates by data firm eMarketer. Yahoo’s share is expected to be 3.4%; Verizon properties including AOL hold an even-smaller 1.8% of the market, according to eMarketer.

Yahoo’s hold on the market is also slipping. In 2014, Yahoo generated $2.54 billion in revenue from U.S. digital ads. That is expected to be $2.32 billion in 2016, or 8.7% lower, according to eMarketer.

“The headwinds for all large players not named Google and Facebook are very real,” said Pivotal Research analyst Brian Wieser.“Noticeable growth only has a chance to come with ongoing investment, whether M&A or internal.”

Last week, Yahoo said second-quarter revenue, minus commissions paid to partners for web traffic, fell 19%. This marked the sixth decline in the past seven periods and the steepest slump under Ms. Mayer.

The Sunnyvale, Calif., company also said display ad prices fell 15% year-over-year in the second quarter, while search ad prices fell 8%. During a conference call with analysts, executives said video ad prices were under pressure because of an influx of video ad supply and “uncertainty” around the Yahoo sale process.

Ms. Mayer also struck a different tone. While past calls were focused on growth, Ms. Mayer spent considerable time touting the company’s lower cost structure. Yahoo’s head count has shrunk about 15% this year to 8,800 employees.

“The pace of cost cutting is significant,” wrote Bernstein Research analyst Carlos Kirjner in a July 19 note. “We suspect that there will be a price to be paid in the future for these fast, deep cuts, reflected in lower revenue growth.”

Analysts are divided on the value of Yahoo’s core business. The decline in search revenue prompted Credit Suisse to cut its valuation of Yahoo’s core business to $7 billion, down from $8 billion. But that is more robust than Mr. Kirjner’s estimate of $3.4 billion.

The Verizon deal is the first major step toward unwinding Yahoo. Next up is a trove of about 3,000 patents, which Yahoo is selling in a separate auction, that is expected to fetch more than $1 billion.

The patents date back to Yahoo’s initial public offering in 1996 and cover key areas such as e-commerce, online advertising and search, including its original search technology.

Yahoo also will need to figure out what to do with its stakes in Yahoo Japan Corp., majority-owned by SoftBank Group Corp., and Chinese e-commerce company Alibaba Group Holding Ltd., considered to make up the majority of Yahoo’s roughly $36 billion market value today.

 

 

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Kusje

Kusje

Supersonic

? is this inclusive of their stake in alibaba?

Yahoo owns a substantial stake right?

 

Dun think so.

 

BTW, Microsoft offered 45 bil in 2008 but was rejected by the yahoo founders.

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Lala81

Lala81

Hypersonic

Dun think so.

 

BTW, Microsoft offered 45 bil in 2008 but was rejected by the yahoo founders.

 

sounds weird.

Offer 5 billion for a company who owns more than that in Alibaba stock.

I believe they couldn't form a new company holding the alibaba stock cos it will incur a huge tax bill so plans were shelved last year.

lol when M$ comes calling, sell out please...

 

Haha 

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Porker

Porker

Turbocharged
  • Author

? is this inclusive of their stake in alibaba?

Yahoo owns a substantial stake right?

 

Not sure because there's no details but highly unlikely because the Alibaba stake is worth more than $20Bil.

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Nonpareil

Nonpareil

4th Gear

The sale is only for Yahoo's core internet operations and land holdings as stated by NYT. Yahoo will still have the holding of Alibaba, Yahoo Japan and patents.

 

http://www.nytimes.com/2016/07/25/business/yahoo-sale.html?_r=0

 

 

The board of the Silicon Valley company has agreed to sell Yahoo’s core internet operations and land holdings to Verizon Communications for $4.8 billion, according to people briefed on the matter, who were not authorized to speak about the deal before the planned announcement on Monday morning.

After the sale, Yahoo shareholders will be left with about $41 billion in investments in the Chinese e-commerce company Alibaba, as well as Yahoo Japan and a small portfolio of patents.

 

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