Verizon buys Yahoo for $ 4.83 billion
After a month-long bidding process and numerous layoffs, Yahoo has finally found a buyer. Verizon (which owns AOL, which owns TechCrunch) is officially acquiring Yahoo’s core business for $ 4.83 billion in cash, which includes Yahoo’s advertising, content, search, and mobile businesses .
“Just over a year ago, we acquired AOL to enhance our strategy of providing a multiscreen connection for consumers, creators and advertisers,” Verizon CEO Lowell McAdam said in the release. “The Yahoo acquisition will put Verizon in a very competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
Yahoo’s stakes in Alibaba and Yahoo Japan are not part of the acquisition. These issues are worth tens of billions of dollars alone. As of Friday, July 22, Yahoo’s 15 percent stake in Alibaba was $ 31.2 billion, and Yahoo Japan’s 34 percent was worth $ 8.3 billion. Yahoo’s patent portfolio, which is worth around $ 1 billion, is not part of the sale either. Yahoo’s Sunnyvale headquarters are part of the acquisition, a source told TechCrunch.
Yahoo will be integrated with AOL and Verizon EVP and President of Product Innovation and New Business Organization Marni Walden will lead the process. AOL CEO Tim Armstrong also mentions Marissa Mayer in his memo however. “For me personally, I plan to stay. I love Yahoo, and I believe in all of you. It’s important for me to see Yahoo in its next chapter, ”Mayer wrote in an internal Yahoo memo. The transaction is expected to be finalized in Q1 2017.
“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 holdings from Asian assets, is an important step in our plan to unlock shareholder value for Yahoo, ”Marissa Mayer said in the statement. “This transaction also sets up a great opportunity for Yahoo to further strengthen distribution and accelerate our work in mobile, video, native and social advertising. Yahoo and AOL have popularized the Internet, email, search and real-time media. It is poetic about joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a formidable, quality, experienced, loyal, team, and I couldn’t be prouder of our accomplishments to date, including building our new business lines to $ 1.6 billion in GAAP revenue in 2015. I am very happy to extend our momentum through this transaction. ”
Last year, Verizon acquired AOL for $ 4.4 billion to boost its media and advertising business. Verizon remains a giant telecommunications company, but the acquisitions of AOL and now Yahoo show the company wants to diversify its revenue and operations.
Once the deal closes, Verizon wants to merge Yahoo and AOL to form a larger advertising and affiliate media. In this way, AOL gets more scale and reaches enough Internet and mobile users to become an advertising giant to reach hundreds of millions, if not billions of people.
As we noted last week when reports emerged that a deal was imminent, AOL has been preparing for this onboarding process for months already. It will be a significant integration process, and the company seems to want to hit the ground running when it comes to the combination of the two teams.
Ultimately, Verizon wants to compete with Google and Facebook when it comes to advertising. Online advertising is currently dominated by two companies based in Silicon Valley. Verizon wants to become the third way.
This isn’t the first time that a telecommunications company has been looking for ways to deliver and operate more dumb pipes for computers and phones – Verizon now wants to control what goes through those pipes. And the company is investing a lot of money in this business.
“Our mission at AOL is to build brands people love, and we’ll continue to invest and grow them. Yahoo has been a longtime investor in premium content and created some of the most beloved consumer brands in major categories like sports, news and finance, ”AOL CEO Tim Armstrong said in the statement. . “We have great respect for what Yahoo has accomplished: this transaction is about unlocking Yahoo’s full potential, leveraging our collective synergies, and strengthening and accelerating that growth. The combination of Verizon, AOL and Yahoo will create a powerful new competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.
Verizon now faces two challenges if the acquisition is approved by the regulator. First of all, the integration process will be difficult. In its most recent earnings appeal, Yahoo says its workforce is 8,800 employees and 700 contractors – by comparison, AOL has 6,800 employees. So, merging two great teams with thousands of employees will not be a small feat for everyone. Second, Yahoo lost some money. Verizon will have to turn Yahoo into a profitable money making company otherwise it will hurt AOL ‘s bottom line.
In the official announcement, Verizon named a few reasons for an acquisition. Yahoo has a global audience of over 1 billion users, including 600 million on mobile. The company also owns the premium brands in finance, news and sports. Yahoo Mail has 225 million monthly active users. And when it comes to advertising and analytics technology, Verizon named Brightroll, Flurry, and Gemini. Interestingly, Verizon didn’t mention Tumblr.
In February and after years of turmoil, Yahoo officially announced that it was considering takeover bids. A month later, activist investor Starboard wrote a controversial letter saying that the entire board should be replaced and the board and management team were dragging their feet on the acquisition process.
Between the lines, you could see that Starboard wanted to sell Yahoo as quickly as possible and maximize the purchase price. But Yahoo CEO Marissa Mayer kept giving interviews and saying she could turn the company around in five to seven years.
When Marissa Mayer joined Yahoo in July 2012, she had big plans to make Yahoo relevant again. She doubled down on mobile, made dozens of Acqui-hires, acquired Tumblr for $ 1.1 billion, acquired Brightroll for $ 640 million, and revamped key products, such as Yahoo Mail, Flickr, Yahoo Weather and Yahoo Messenger.
But all of these changes didn’t really boost the profitability of the company, which led to today’s acquisition.
While Verizon was the most likely buyer from day one, other potential buyers included AT&T, a private equity group led by TPG, and an investor group led by Dan Gilbert of Quicken Loans. Verizon will be holding a call in just over an hour with more details on the transaction. Verizon shares are flat (0.21 percent) in pre-market trading after the news. The leaked case began on Friday and shareholders expected today’s announcement.
