Verizon said to be planning bid for Yahoo; Google weighs offer
Verizon Communications Inc. plans to make a first-round bid for Yahoo Inc.’s web business next week, and is willing to acquire the company’s Yahoo Japan Corp. stake to help sweeten the offer, according to people familiar with the matter.
Google, the main division of Alphabet Inc., is also considering bidding for Yahoo’s core business, a separate person said.
Potential suitors AT&T Inc. and Comcast have decided against bidding, some of the people said, asking not to be identified as the discussions aren’t public. Microsoft Corp., which failed with a hostile bid for Yahoo in 2008, won’t bid this time, another person said.
Time Inc. is still evaluating a bid, while private equity funds Bain and TPG — among others — are also planning to make a run at the business, either alone or by backing a strategic acquirer, the people said.
While the buyout firms haven’t yet paired themselves with a strategic buyer, they are open to the idea of doing so, the people said.
Yahoo has extended the deadline for first-round bids by a week, to April 18, according to a person with knowledge of the matter.
Shares of Yahoo Japan jumped 6.4 per cent in Tokyo, the biggest gain in almost three months.
Verizon and its subsidiary AOL Inc. are working with at least three financial advisers on the Yahoo bid, said three of the people. Hiring so many banks is a sign that Verizon is serious about its takeover plans — it has said since late last year that it was interested in buying some or all of Yahoo. Verizon, which has a market value of about US$213 billion, could give the Yahoo Japan stake to its shareholders or sell it, one of the people said.
Sunnyvale, Calif.-based Yahoo would prefer to sell its 35.5 per cent stake in Yahoo Japan, worth about US$8.5 billion, along with the core business, Bloomberg reported last month. The valuation of the combined assets would make it more difficult for private equity firms to finance a bid for both parts.
Representatives for Yahoo, AT&T, Comcast, Time, TPG and Verizon declined to comment. Representatives for Bain and Google didn’t immediately respond to requests for comment. Based on the financial information that it’s seen, Verizon values Yahoo’s core business at less than US$8 billion, one of the people said. Verizon, as well as some private equity firms, met with Microsoft last month to talk about potential funding for a bid, people familiar with the matter said at the time. Microsoft hasn’t committed any funding and is unlikely to provide anything more than a token investment to the winning bidder, one of the people said.
A spokesman for Microsoft declined to comment.
Yahoo’s projected revenue will drop almost 15 per cent and earnings by more than 20 per cent for 2016, according to a slide deck it released to potential bidders, Re/ code reported Wednesday.
Verizon would replace Yahoo chief executive Marissa Mayer with AOL CEO Tim Armstrong and Marni Walden, Verizon’s executive vice-president, who would run a combined Yahoo and AOL, two of the people said.
Japan’s SoftBank Group Corp. has always had tepid interest in buying Yahoo, two of the people said. So far, discussions have focused on Yahoo Japan, in which SoftBank is the majority shareholder, paying a reduced licensing fee to Yahoo.
The two sides are in active discussions to lower this fee, which stands at three per cent of gross revenue, before any deal to sell Yahoo is announced.