Yahoo Signing Off in $4.83B Sale to Verizon

Known as one of the first big brands on the Internet -- and trademarked by its yodeling jingle and the exclamation point at the end of its name -- Yahoo is now under agreement with Verizon to be acquired for approximately $4.83 billion in cash.

Verizon Communications Inc. (NYSE: VZ) announced this morning that it expects to close on Yahoo Inc. (Nasdaq: YHOO) early in 2017 and integrate the business with its AOL division under EVP Marni Walden. The $4.83 billion purchase price is significantly higher than the $3 billion amount Verizon was reported to have bid back in June. However, Verizon faced competition for the Yahoo buy from private equity sources and rival telco AT&T Inc. (NYSE: T). (See Verizon Bids $3B for Yahoo – WSJ Report.)

At its height in 2000, Yahoo was reported to be worth $125 billion. (See Verizon to Buy Yahoo for $4.8B.)

The sale does not include certain non-core patents (known as the Excalibur portfolio), which Yahoo is reportedly trying to sell in a separate deal. It also doesn't include Yahoo's investments in Alibaba Group and Yahoo Japan. The New York Times estimates these holdings add up to about $32 billion and $8.7 billion respectively.

Yahoo's stock has risen since the beginning of 2016 from about $33 per share to just under $40 per share. However, it dropped from $39.38 at the close of business on Friday to $38.45 at the time of publication this morning.

Verizon's share price also dropped from $56.08 late Friday to $55.74 this morning.

Verizon's interest in Yahoo stems from an ambition to build up its digital content and advertising business, which is also why the telco bought AOL Inc. (NYSE: AOL) for $4.4 billion in 2015. (See Verizon's $4.4B AOL Buy a Digital Media Play.)

According to AOL CEO Tim Armstrong, "Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers."

That sentiment is another way of saying that Verizon hopes to challenge top players Google (Nasdaq: GOOG) and Facebook in the market for digital ad revenue. In addition to Yahoo's content brands, it also owns ad technology assets including: a programmatic demand-side platform gained through its acquisition of Brightroll; mobile app analytics service Flurry; and native and search advertising solution Gemini.

The challenge for Verizon will be integration of all these various assets, including AOL's New York City-based operations and Yahoo's Silicon Valley offices, into an entity capable of competing at web-scale in a way both AOL and Yahoo failed to do individually.

Verizon currently sells multiscreen media services through its Verizon Digital Media Services group alongside ad inventory and other advertising solutions brought in through AOL. Verizon is also hoping to further monetize its vast wireless network through its Go90 mobile video service, but those efforts have yet to bear fruit. (See Verizon Backpedals on Go90.)

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

(8)  |