Verizon to buy Yahoo’s core business for almost $5bn

Verizon Communications said on Monday it would buy Yahoo's core internet properties for $4.83 billion in cash, marking the end of the line for a storied web pioneer and setting the stage for a big new internet push by the telecom giant.

Verizon will combine Yahoo’s search, email and messenger assets as well as advertising technology tools with its AOL unit, which it bought last year for $4.4 billion. Verizon, the leading US wireless operator, has been looking to mobile video and advertising for new sources of revenue outside the oversaturated wireless market.

The deal came after activist investors led by Starboard Value lost faith in Yahoo chief executive Marissa Mayer, who was hired in 2012, and forced what became a protracted sale process.

Yahoo, founded in 1994, was a dominant player in the early days of the internet, but has long lost its leadership position in internet search and advertising to Google, Facebook and others.

Ms Mayer said on a conference call with investors that she planned to stay at Yahoo through the deal’s close. Marni Walden, head of product innovation and new business at Verizon, will head the combined internet unit and said no decisions had yet been made on the management team.

Verizon could combine data from AOL and Yahoo users in addition to its more than 100 million wireless customers to help advertisers target users based on online behavior and preferences.

“Yahoo gives us scale that is what is most critical here,” said Ms Walden, adding that the company’s audience will go from the millions to the billions. “We want to compete and that is the place we need to be.”

Ms Mayer, in an interview with Reuters, said she still saw a “path to growth” for Yahoo, especially in mobile. “What’s exciting about the Verizon transaction is that it brings us back to growth sooner,” she said. She said she was “open-minded” about a possible role with the combined companies.

Yahoo is still one of the largest properties on the internet, with hundreds of millions of customers using its email, finance and fantasy sports offerings, among others, and a heavily trafficked home page.

But Google has a stranglehold on the internet search business and built an industry-leading email service, while Facebook dominates in mobile and social media. Meanwhile, traditional web banner advertising, long Yahoo’s strength, has become much less lucrative in the age of mobile and video.

“It’s a decade of mismanagement that has finally ended for Yahoo,” said Recon Analytics analyst Roger Entner. “It’s the continuation of an extension of Verizon’s strategy toward becoming a wireless internet player and a move away from [telecom] regulation for Verizon into an unregulated growth industry.”

Shares of Verizon, which reports results Tuesday, dipped 0.4 per cent to $55.88, Yahoo fell 2.6 per cent to $38.37.

The Verizon deal would transform Yahoo into a holding company, 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 as well as Yahoo's convertible notes, certain minority investments and its noncore patents.

Yahoo executives said the remaining company is structured to “indefinitely“ hold its Yahoo Japan and Alibaba stakes. They are worth about $40 billion based on their market capitalisations, while Yahoo had a market value of about $37.4 billion at Friday’s close.

– (Bloomberg)