Verizon to announce $5 billion deal to buy Yahoo on Monday

Verizon Communications Inc will announce an agreement on Monday to buy Yahoo Inc for about $5 billion, according to a person familiar with the matter.

The announcement is expected to come before the start of New York trading hours.

The deal will end months of uncertainty about Yahoo’s future after the company announced plans to review strategic alternatives in February.

People briefed on Verizon's strategy have said the company plans to merge Yahoo with AOL, which it bought for $4.4 billion last year, to build a "number three" in digital advertising behind Google and Facebook.

Alibaba

Once the core business of Yahoo is sold, only its stakes in Alibaba, the Chinese ecommerce group, and Yahoo Japan, jointly owned with SoftBank, will remain. Investors are eager to gain access to the stake in Alibaba, which is worth $31.2bn at the current share price. Yahoo's 35.5 per cent stake in Yahoo Japan is valued at about $9 billion.

Advertisers

Verizon is betting that advertisers want a sizeable alternative to Google and Facebook, which dominate online advertising. Google will control nearly 39 per cent of a projected $69bn in digital ad revenues in the US this year, according to eMarketer, while Facebook will take 15 per cent. Verizon-AOL will have 1.8 per cent and adding Yahoo would bring its share to 5.2 per cent.

Tim Armstrong, who joined Verizon after last year's deal, would run the combined unit and report to Marni Walden, an executive vice-president in charge of new businesses. Marissa Mayer, who took over at Yahoo four years ago, could be in line for a $55 million pay-off.

Yahoo was not immediately available, and Verizon declined to comment.

- (Reuters/Financial Times)