Verizon is believed to have made a $3 billion offer for Yahoo's core Internet business during a second round of bidding for the assets, according to a report from the Wall Street Journal (WSJ) that cites a source familiar with the matter.
The telecom giant has emerged as the leading contender in the race to acquire Yahoo Inc. (Nasdaq: YHOO)'s assets ever since the ailing Internet player put the business up for sale earlier this year. According to the latest WSJ report, however, Verizon Communications Inc. (NYSE: VZ) faces strong competition from private equity player TPG, which was also expected to submit a second-round bid in time for the Monday deadline this week. (See Verizon, Softbank Likely Yahoo Contenders and Investors Question Yahoo's Spinoff Intentions.)
Yahoo is expected to hold a third round of bidding and offers could change at that stage, according to the WSJ source.
The Internet company believes it could also raise $1 billion from the sale of non-core assets including patents and real estate, although Verizon has indicated it has no interest in these assets.
It remains unclear whether other companies that participated in an earlier round of bidding submitted fresh offers on Monday. Those players include Advent International, Vista Equity and a group led by Dan Gilbert, the founder of mortgage lender Quicken Loans, reports the WSJ.
A Verizon bid of $3 billion appears to indicate the value of Yahoo's core business has fallen markedly since April, when WSJ sources estimated it would sell for between $4 billion and $8 billion.
Buoyed by expectations of a sale, Yahoo's share price has risen by 39% since mid-February but is still 13.4% lower than this time last year.
Revenues fell by 11.3% in the first three months of the year, to around $1.1 billion, compared with the same period in 2015, and Yahoo also swung to a net loss of $99 million from a year-earlier profit of $21 million.
Verizon would probably look to combine Yahoo's assets with its existing online advertising business. Last year, it acquired web company AOL Inc. (NYSE: AOL) to beef up its advertising and digital content interests. (See Verizon's $4.4B AOL Buy a Digital Media Play.)
According to the Bloomberg report, AT&T sees value in the IT systems and algorithms that Yahoo has developed and believes these could enhance its own mobile and video service packages.
— Iain Morris, , News Editor, Light Reading