Pursuant to the agreement, Verizon will acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to customary adjustments. Verizon, the largest United States wireless carrier, also gets smaller but faster-growing assets including mobile applications and advertising technology for video and handheld devices.
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Long-suffering Yahoo will sell its core business to Verizon Communications for $4.8 billion, a far cry from the $44.6 billion that Microsoft offered in 2008 and that Yahoo’s board rebuffed.
“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL”, Marissa Mayer, CEO of Yahoo, said.
Alibaba, which set the record for the largest USA -listed IPO of all time in 2014, is a giant Chinese e-commerce platform and now has a market capitalization of more than $200 billion. Verizon will also gain Yahoo’s email service, which boasts 225 million users, and several of the company’s advertising technology assets, including Brightroll, Flurry and Gemini.
“It’s the eyeballs that generate the advertising, you have to get to that viewership to get the advertisers to advertise, and that’s the model that we have to follow”, said Verizon CFO Francis Shammo at an investment conference in May in response to a question about Yahoo’s appeal. However, Mayer wrote in a memo on Thursday that she plans to stay. “It’s premature to talk about who will be in what roles” longer term, she said.
Having once been the go-to destination for internet users, it has since been surpassed by search engines such as Google and social networks like Facebook.
In the U.S., Yahoo is the second most-popular email service behind Google’s Gmail.
“It’s a decade of mismanagement that has finally ended for Yahoo”, said Recon Analytics analyst Roger Entner.
The integration of Yahoo will not come without challenges.
Verizon will likely try and combine both acquisitions and tap into Yahoo Finance users to compete with Google and Facebook on digital ads. Despite Yahoo growing its mobile advertising business under Mayer’s tenure, the company is expected to earn a dwindling share of a growing global digital ad market, according to research firm eMarketer. Yahoo will be left with its stakes in Alibaba Group Holding and Yahoo Japan, with a combined market value of about $US40 billion. Yahoo operated independently for 21 years, but has struggled in recent years to make money and battle falling stock prices.
The deal is expected to close in 2017’s first quarter.
Eventually, Yahoo will change its name and become a publicly traded investment company.
Yahoo now has $US7.7 billion in cash, in addition to the $US4.8 billion it will receive at the close of the deal, which it plans to return to shareholders, Yahoo executives said on the call.
Verizon prevailed over rival bidders, including AT&T Inc; a group led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett; private equity firm TPG Capital Management LP; and a consortium of buyout firms Vector Capital and Sycamore Partners.
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After being under pressure from activist and investor Starboard Value, Yahoo launched an auction of its core business in February after dropping plans to follow-up its stake in Alibaba.
