Verizon to buy Yahoo's operating business for $4.83 bn

25 Jul 2016


Verizon is pushing for a $1-billion discount off its pending $4.8-billion agreement to buy Yahoo, according to a New York Post report citing several sources (See: Verizon to buy Yahoo's operating business for $4.83 bn).

Verizon Communications Inc and Yahoo! Inc said they have entered into a definitive agreement under which Verizon will acquire Yahoo's operating business for approximately $4.83 billion in cash.

The deal, which is expected to close in early 2017, marks the end of Yahoo as an operating company, leaving it with a 15 per cent stake in Chinese e-commerce company Alibaba Group Holding Ltd and a 35.5-per cent interest in Yahoo Japan Corp.

Yahoo will be integrated with AOL under Marni Walden, executive vice president and president of the product innovation and new businesses organization at Verizon, Lowell McAdam, Verizon chairman and CEO said.

The deal to acquire the fading business of the internet pioneer was finalised after lengthy negotiations.

Yahoo's operations will complement Verizon's AOL internet business, which it bought last year for $4.4 billion while also giving it access to Yahoo's ad technology tools, BrightRoll and Flurry, and assets such as search, mail and messenger.

Yahoo claims to have more than 1 billion active users globally, 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.''

''The transaction will create a new rival in mobile media technology reaching over 1 billion users, with an unrivaled roster of the world's most beloved brands,'' Verizon stated in a release.

''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,'' he added.

''Yahoo and AOL popularised 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,'' Marissa Mayer, CEO of Yahoo, said.

''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,'' she added.
"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," Mayer said in a statement.

Yahoo will continue as an independent company until the deal receives shareholder and regulatory approval, the companies said.

In a Tumblr blog post, Mayer said she planned to stay at Yahoo, but Verizon's Marni Walden, who will head the combined company, told CNBC the new leadership team has yet to be determined.

The sale does not include Yahoo's cash, its shares in Chinese e-commerce giant Alibaba Group Holding Ltd, shares in Yahoo Japan, Yahoo's convertible notes, certain minority investments or Yahoo's non-core patents.

The Alibaba and Yahoo Japan investments are worth about $40 billion, while Yahoo had a market value of about $37.4 billion as of Friday's close.

Other bidders for Yahoo included AT&T Inc, a group led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett, private equity firm TPG Capital LP and a consortium of buyout firms Vector Capital and Sycamore Partners.

Yahoo launched an auction of its core business in February after shelving plans to spin off its stake in Alibaba as pressure from activist investor Starboard Value LP mounted.

LionTree Advisors, LLC, Allen & Company LLC, Bank of America Merrill Lynch and Guggenheim Securities, LLC are acting as financial advisors to Verizon. Wachtell, Lipton, Rosen & Katz, Gibson, Dunn & Crutcher LLP, Covington & Burling LLP and Winston & Strawn LLP are acting as legal advisors to Verizon.

Goldman, Sachs & Co., J.P. Morgan Securities LLC and PJT Partners are acting as financial advisors to the Yahoo Board and its Strategic Review Committee. Skadden, Arps, Slate, Meagher & Flom LLP, Wilson Sonsini Goodrich & Rosati and Weil Gotshal & Manges LLP are acting as legal advisors to Yahoo. Cravath, Swaine & Moore LLP is independent legal advisor to Yahoo's Strategic Review Committee.

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