Yahoo to sell Web assets to Verizon for $6.5b

The all-cash deal with Verizon Communications includes Yahoo real estate, but excludes some intellectual property which will be sold separately. Yahoo will be left with its stakes in Alibaba Group Holding and Yahoo Japan.
The all-cash deal with Verizon Communications includes Yahoo real estate, but excludes some intellectual property which will be sold separately. Yahoo will be left with its stakes in Alibaba Group Holding and Yahoo Japan.PHOTO: REUTERS

Deal with US wireless carrier marks end of Yahoo's 20 years as operating company

SAN FRANCISCO • Yahoo has agreed to sell its main Web businesses to Verizon Communications for US$4.8 billion (S$6.5 billion). With that, it ends a two-decade run as an independent company that took it from Stanford University start-up at the dawn of the Internet age to an also- ran that lagged behind nimbler online rivals like Google and Facebook.

The all-cash deal includes Yahoo real estate, but excludes some intellectual property which will be sold separately. Yahoo will be left with its stakes in Alibaba Group Holding and Yahoo Japan, with a combined market value of about US$40 billion.

The purchase will boost Verizon's AOL Internet business, which it bought last year for US$4.4 billion, and give it access to Yahoo's ad technology tools, BrightRoll and Flurry, and assets such as search, mail and messenger.

UNLOCKING SHAREHOLDER VALUE

The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo.

YAHOO CEO MARISSA MAYER

  • Years of struggles

  • 2012: A struggling Yahoo poaches Ms Marissa Mayer from Google to be its new chief executive. 

    Since 2013: Acquisitions worth US$3 billion (S$4.1 billion) do not translate to growth for Yahoo as it struggles to keep up with changing Internet advertising landscape. 

    2015: Yahoo abandons plans to spin off stake in Chinese e-commerce firm Alibaba. 

    January 2016: Activist shareholder Starboard Value calls for Yahoo's core business to be sold. 

    February: Yahoo unveils plans to cut staff. It starts a prolonged auction of its core Internet business. 

    March: Sales fall 18 per cent in the first quarter to US$859.4 million. Starboard pushes for entire Yahoo board, including Ms Mayer, to be removed. 

    April: Yahoo reaches a pact to add Starboard chief Jeffrey Smith and three nominees to its board. Firm reports US$99 million in quarterly loss. 

    May: Verizon is front runner in bidding for Yahoo.

    July: Verizon acquires Yahoo's core business.

    SOURCES: BBC, BLOOMBERG

The largest United States wireless carrier will add Yahoo Web services that still draw one billion monthly users, and get smaller but faster-growing assets including mobile apps.

The deal marks the end of Yahoo as an operating company.

"The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo," its chief executive Marissa Mayer said in a statement yesterday.

Yahoo will continue as an independent company until the deal receives shareholder and regulatory approval, the companies said.

Ms Mayer's arrival at Yahoo was met with great fanfare when she was lured away from Google in 2012. While she made progress on some products, overall sales growth remained sluggish. A failed attempt to spin off the company's Alibaba stake, now worth about US$32 billion, hurt her standing with investors. The plan was scuttled to avoid a potentially large tax burden.

In a Tumblr blog post, Ms Mayer said she plans to stay at Yahoo, but Verizon's Ms Marni Walden, who will head the combined company, told CNBC the new leadership team has yet to be determined.

The shares of the company were little changed in early trading yesterday at US$39.11, after closing 1.3 per cent up last Friday at US$39.38. Yahoo stock has risen 18.4 per cent so far this year.

With its core wireless business maturing, Verizon is expected to keep Yahoo mostly intact to compete with Alphabet Inc's Google and Facebook in digital ads by tapping users on sites like Yahoo Finance. The takeover will double the size of Verizon's digital advertising, placing it as a distant third behind Google and Facebook in the US$187 billion market.

"The deal speaks to a clear strategy shift at Verizon," said Moffett- Nathanson analyst Craig Moffett. "They are trying to monetise wireless in an entirely new way. Instead of charging customers for traffic, they are turning to charging advertisers for eyeballs."

AT&T and Quicken Loans founder Dan Gilbert, as well as firms Vector Capital Management and TPG, were also active in bidding for Yahoo.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 26, 2016, with the headline 'Yahoo to sell Web assets to Verizon for $6.5b'. Print Edition | Subscribe