Yahoo sold to Verizon in $4.8bn deal

September 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

For a company that once had a market capitalisation of more than $100bn, the sale of Yahoo’s core business to Verizon Communications Inc for $4.83bn brings an end to a remarkable and protracted downward spiral for one of the internet’s first global giants.

The future of the company has been up for debate for some time. Yahoo’s current chief executive, Marissa Mayer, was a former Google executive brought into Yahoo in 2012 to steady the ship and return the company to prominence. Under Ms Mayer’s leadership, Yahoo has been extremely active, acquiring more than 50 startups for around $2.1bn. The most notable acquisition under Ms Mayer was that of the blogging site Tumblr, which Yahoo purchased for $1.1bn in 2013.

Though Ms Mayer found some success and was able to turn around certain aspects of Yahoo’s fortunes, she was unable to restore the company to its former glory. Its revenue fell and its talent fled to sunnier climes. It was these failures which ultimately led to Yahoo’s absorption by Verizon.

Yahoo, once a darling of the dotcom era, rejected a $44bn Microsoft offer in 2008. To accept an all-cash offer of $4.83bn demonstrates just how far the company has fallen in recent years. Although it was one of the leading lights in the first golden age of the internet, Yahoo failed to keep pace with newer, more agile competitors such as Google and Facebook.

Following the deal, announced in late July, a number of Yahoo’s subsidiaries and services, including email, search and messenger, will become part of Verizon’s AOL group. Verizon acquired AOL – another 90s internet powerhouse – in 2015 for $4.4bn. The merger of Yahoo into Verizon will see the company become a global mobile media company, according to Lowell McAdam, Verizon’s chairman and CEO. Yahoo brings with it 600 million monthly active mobile users, as well as its email service, Yahoo Finance, and Tumblr, which is popular among millennials and younger audiences.

“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Mr McAdam. “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.”

The deal is subject to customary closing conditions, as well as approval by Yahoo’s shareholders, and other regulatory approvals. The companies expect the transaction to close in the first quarter of 2017.

In the meantime, Yahoo will continue to operate independently. Ms Mayer will lead the company until the deal is complete. Although she has indicated that she would like to stay on with the company, her four year tenure may be coming to an end.

“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL,” Ms Mayer said in a statement announcing the deal. “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,” she added.

One of the bright spots in Yahoo’s recent history has been the company’s stake in Chinese retail giant Alibaba Group Holding Ltd. The company confirmed that the sale of its core business will not include its cash, its shares in Alibaba, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments or any of Yahoo’s non-core patents. These Asian assets will be held by Yahoo in a company currently known as Remain Co. Once the deal has been completed, the company will change its name and become a registered, publicly traded investment company.

Richard Summerfield