Yahoo’s core business will be acquired to bolster Verizon content business, including AOL
Verizon is expected to announce a $4.8 billion (£3.7bn) deal for Yahoo’s internet business on Monday, ending months of speculation.
For Verizon, the deal adds considerable services to the media and advertising business the company is trying to grow. For Yahoo, the sale of its core business speaks volumes about the health of a company that once had a market cap of $125 billion.
Last week Yahoo disappointed investors when it revealed a £332 million loss in its second quarter and failed to provide any update on the sale of its core internet business.
Now according to Bloomberg, which cited people familiar with the matter as its source, Verizon has edged out rival bidders for the company.
In May, Verizon was reported to be one of the shortlisted bidders among nine others who were after Yahoo’s Internet business.
The sticking point seems to have been price, with Yahoo seeking a price close to $5bn (£3.7bn) for the core internet business. The deal reportedly doesn’t include Yahoo’s patents, but other assets such as real estate holdings are thought to be up for discussion.
According to Bloomberg, the companies may be ready to announce the deal in the coming days, but the agreement hasn’t been finalised and may still not happen. One of its sources said that Verizon and Yahoo were conducting one-to-one discussions.
“The buyer that could make the most out of these assets has apparently won,” Roger Entner, an analyst with Recon Analytics was quoted by Bloomberg as saying. “No one could get more out of Yahoo’s businesses than Verizon.”
It is thought that Verizon sees Yahoo as a complimentary fit alongside its AOL entities. Verizon has been positioning itself to challenge Google and Facebook in the mobile advertising space, and Yahoo offers potentially millions of customers, and notable websites including Flickr, Tumblr and Yahoo Finance and Sports.
Yahoo boss Marissa Mayer has been seeking a buyer for a while, after years of shareholder pressure from the likes of Canyon Capital Advisors and Mason Capital.
At one stage Yahoo considered offloading its core Internet business, but it turned away several potential buyers of this core unit. It also decided against spinning off its its $30bn stake in Alibaba because of tax implications.
But investor pressure eventually persuaded her to seek buyers for the company’s core assets.
And it should be remembered that Yahoo has been ridding itself of non core assets for some time. It previously closed some of its regional, genre-specific media properties for example. Items closed down included Yahoo Music in France and Canada as well as Yahoo Movies in Spain. The Yahoo Philippines homepage and genre-specific media sites were also axed.
In addition, Yahoo TV in the UK, France, Germany, Spain, Italy and Canada as well as Yahoo Autos in the UK, France, Germany, Spain and Italy were closed down. The company also closed down Yahoo Entertainment.
The pioneering search engine AltaVista, as well as the browser plug-in Axis were also closed a number of years ago.
Prior to that Yahoo also closed its Chinese Yahoo Mail service, its events planner (Yahoo Upcoming), and its Groupon-rival (Yahoo Deals). Other closures include Yahoo’s SMS alerts service and Yahoo Kids.
The company also announced in February that it was slimming down when it confirmed it was letting go 15 percent of its workforce.
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