$4.8B buyout of Yahoo jump-starts online war
With deal, Verizon ups ante against Google, Facebook
Verizon is making a major bet that it can put together two fading giants — Yahoo and AOL — to create a new mobile and online powerhouse.
The telecommunications giant announced Monday that it will spend $4.8 billion to acquire Yahoo’s operating business, which includes advertising technology and popular online content such as Yahoo Sports, Yahoo Finance and micro-blogging site Tumblr, which it acquired in 2013 for $1.1 billion.
Also included in the deal: the Yahoo brand and real estate attached to the core business, including Yahoo’s headquarters in Sunnyvale, Calif.
By pairing Yahoo with AOL — which Verizon bought in May 2015 for $4.4 billion — Verizon’s resulting digital media unit could represent another competitive option for advertisers currently flocking to Google and Facebook. Across its various properties, Yahoo draws 1 billion monthly users.
“For advertisers, it creates a third platform of scale,” said Robert Peck, an Internet equity analyst at SunTrust Robinson Humphrey. “Right now, you only have two of them, which are Google and Facebook. Advertisers are looking for another platform of scale that can reach mass audiences, and this creates that.”
Verizon has been the leading candidate in Yahoo’s five-month sale process. Verizon, and its AOL unit, were attracted by those 1 billion monthly users, said AOL CEO Tim Armstrong, who will oversee the integration under the purview of Marni Walden, Verizon’s executive VP and president of the product innovation and new businesses organization.
Not included in the deal: Yahoo’s 15% stake in Chinese retailing giant Alibaba, worth $32 billion, and its 36% stake in Yahoo Japan, worth about $8 billion. When the transaction closes — which is expected in the first quarter of 2017 — Yahoo will change its name and become a publicly traded investment company, the company said. CEO Marissa Mayer will help with the transition and could stay on long term, Armstrong said.
Shares of Verizon were down Monday 0.4% to $55.87. Yahoo shares were down 2.7% to $38.32.