Verizon acquires Yahoo for $4.63 billion

Yahoo

When you think of the history of internet search, Google and Yahoo are probably two of the first three brands you think of from years gone by. Unlike Google, though, Yahoo hasn’t done too well for itself over the past few years. Despite spending year-after-year restructuring itself attempting to make itself more pertinent to the modern world, Yahoo simply hasn’t succeeded, posting a $440 million loss for the second quarter of 2016. In a further development, Verizon Communications has announced today that it is acquiring Yahoo’s core businesses for $4.83 billion.

That $4.63 billion gets Verizon’s hands on Yahoo’s search, mail, instant messaging services, as well as its advertisement business. Yahoo Finance, Sports, Flickr, and Tumblr are also part of the deal. This isn’t the first time that Verizon has bought a fading internet company, with the carrier having purchased AOL in 2015 for a similar price as part of its strategy to provide a “cross-screen connection for consumers, creators, and advertisers“. Today’s deal sees a billion active monthly users swap over to Verizon, giving it a huge target audience and helping to achieve a global presence.

While the core businesses have been sold to Verizon, Yahoo will retain its 35% stake in the Chinese company, Alibaba, as well as its stake in Yahoo Japan, and its cash reserves. According to the press release, Yahoo will change its name at closing and become a publicly traded investment company.

I wonder if the company’s shareholders regret turning down Microsoft’s offer of $44 billion back in 2008? What do you make of the acquisition and the demise of Yahoo as a standalone internet company?

Full Press Release

Verizon to acquire Yahoo’s operating business
Transaction will create a new rival in mobile media technology reaching over 1B users* with an unrivaled roster of the world’s most beloved brands
BASKING RIDGE, NJ, and SUNNYVALE, Calif. – July 25, 2016 – Verizon Communications Inc. (NYSE, Nasdaq: VZ) and Yahoo! Inc. (Nasdaq: YHOO) today announce they have entered into a definitive agreement under which Verizon will acquire Yahoo’s operating business for approximately $4.83 billion in cash, subject to customary closing adjustments.

Yahoo informs, connects and entertains a global audience of more than 1 billion monthly active users** — including 600 million monthly active mobile users*** through its search, communications and digital content products. Yahoo also connects advertisers with target audiences through a streamlined advertising technology stack that combines the power of their data, content and technology.

“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers. The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

Lowell McAdam, Verizon Chairman and CEO
Yahoo will be integrated with AOL under Marni Walden, EVP and President of the Product Innovation and New Businesses organization at Verizon.

“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”

Marissa Mayer, CEO of Yahoo
Mayer added, “Yahoo and AOL popularized the Internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”

“Our mission at AOL is to build brands people love, and we will continue to invest in and grow them. Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance.”

Tim Armstrong, CEO of AOL
Under Armstrong, AOL has invested in and grown global premium brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, and market-leading programmatic platforms — including ONE by AOL for both advertisers and publishers.

Armstrong added, “We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. 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.”

The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL and Yahoo will have more than 25 brands in its portfolio for continued investment and growth. Yahoo’s key assets include market-leading premium content brands in major categories including finance, news and sports, as well as one of the most popular email services globally with approximately 225 million monthly active users****. Additional technology assets in the advertising space include Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising solution.

The deal is subject to customary closing conditions, approval by Yahoo’s shareholders, and regulatory approvals, and is expected to close in Q1 of 2017. Until the closing, Yahoo will continue to operate independently, offering and improving its own products and services for users, advertisers, developers and partners.

Verizon will generally issue cash-settled Verizon RSUs for Yahoo RSUs that are outstanding at the close.

The sale does not include Yahoo’s cash, its shares in Alibaba Group Holdings, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio). These assets will continue to be held by Yahoo, which will change its name at closing and become a registered, publicly traded investment company. Yahoo will provide additional information about the investment company at a future date.
Transaction will create a new rival in mobile media technology reaching over 1B users* with an unrivaled roster of the world’s most beloved brands.

Yahoo intends to return substantially all of its net cash to shareholders and will determine and communicate a specific capital return strategy at an appropriate time.


About the Author: Peter Holden

He's been an Android fan ever since owning an HTC Hero, with the Dell Streak being his first phablet. He currently carries a Huawei P10 and a Galaxy Tab S2 8.0. When not immersed in the world of Android and gadgets, he's an avid sports fan, and like all South Africans, he loves a good Braai (BBQ).