Verizon snaps up Yahoo for less than $5bn
July 28, 2016
Verizon Communications has entered into a definitive agreement to acquire Yahoo’s operating business for approximately $4.83bn in cash, subject to customary closing adjustments. This follows the company reporting strong profitability that it attributes to growth in mobile markets and the IoT.
Yahoo informs, connects and entertains a global audience of more than one billion monthly active users, including 600 million monthly active mobile users through its search, communications and digital content products. Yahoo also connects advertisers with target audiences through a streamlined advertising technology stack that combines the power of data, content and technology.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Lowell McAdam, Verizon chairman and CEO. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
Yahoo will be integrated with AOL under Marni Walden, EVP and president of the product innovation and new businesses organisation at Verizon.
“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL,” said Marissa Mayer, CEO of Yahoo. “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. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”
Mayer said that Yahoo and AOL popularised the internet, email, search and real-time media.
“It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile,” he said. “We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6bn in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”
Tim Armstrong, CEO of AOL, added: “Our mission at AOL is to build brands people love, and we will continue to invest in and grow them. Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance.”
Under Armstrong, AOL has invested in and grown global premium brands, including The Huffington Post, TechCrunch, Engadget, Makers and AOL.com, and programmatic platforms including One by AOL for both advertisers and publishers.
“We have enormous respect for what Yahoo has accomplished,” said Armstrong. “This transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”
The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL and Yahoo will have more than 25 brands in its portfolio for continued investment and growth. Yahoo’s key assets include premium content brands in major categories including finance, news and sports, as well as one of the most popular email services globally with approximately 225 million monthly active users. Additional technology assets in the advertising space include: Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising service.
The deal is subject to customary closing conditions, approval by Yahoo’s shareholders, and regulatory approvals, and is expected to close early next year. Until the closing, Yahoo plans to continue to operate independently, offering and improving its own products and services for users, advertisers, developers and partners.
The sale does not include Yahoo’s cash, its shares in Alibaba Group Holdings, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents called the Excalibur portfolio. These assets will continue to be held by Yahoo, which will change its name at closing and become a registered, publicly traded investment company.
Yahoo intends to return substantially all of its net cash to shareholders and will determine and communicate a specific capital return strategy at an appropriate time.
In the second quarter of this year, Verizon saw new revenue streams from the IoT continue to grow, with revenues of approximately $205m, a year-over-year increase of about 25 per cent.