New York-based telecom company Verizon Communications has agreed to purchase Yahoo’s core internet business and some land holdings for $4.8 billion, according to several media reports that cited people familiar with the matter. The deal, which is to be announced Monday morning, will also end the four-year reign of Yahoo CEO Marissa Mayer, who is unlikely to join Verizon.
Since the bidding for the beleaguered internet giant began in April, Verizon has emerged has a clear front-runner. Verizon, once it acquires Yahoo, is likely to combine its online business with AOL, which it bought last year in a deal valued at roughly $4.4 billion. However, even a combined Yahoo and AOL would fail to outpace Facebook and Google, which currently account for over half of the U.S. digital ad market, according to a Wall Street Journal estimate.
“The deal speaks to a clear strategy shift at Verizon,” Craig Moffett, an analyst with the equity research firm MoffettNathanson, told Bloomberg. “They are trying to monetize wireless in an entirely new way. Instead of charging customers for traffic, they are turning to charging advertisers for eyeballs.”
Even after the sale, Yahoo will still retain its roughly $41 billion stake in the Chinese e-commerce company Alibaba and Yahoo Japan.
Yahoo — a company that had a market capitalization of $125 billion in its heyday in 2000 — has, in recent years, struggled to remain profitable as it competes with Google and Facebook for digital market advertising share. In April, the company reported an 18 percent drop in its first quarter revenue, which fell below $1 billion for the first time since Marissa Mayer took over as the CEO in 2012.
At the time, Mayer said that Yahoo had made “substantial progress” toward providing strategic alternatives to its shareholders.
Earlier this month, Yahoo reported another quarterly loss. Its second quarter revenue — excluding commissions paid to partners for web traffic — dropped 19 percent.
“The headwinds for all large players not named Google and Facebook are very real,” Brian Wieser, an analyst at Pivotal Research, told the Journal. “Noticeable growth only has a chance to come with ongoing investment, whether M&A or internal.”
Verizon confirmed in a statement released Monday morning that it has entered into a definitive agreement to purchase Yahoo’s core business for $4.83 billion in cash, ending a long drawn out auction process. The deal, which is subject to regulatory and shareholder, will bolster Verizon’s AOL internet business, which the New York-based company acquired for $4.4 billion last year.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” Verizon Chairman and CEO Lowell McAdam said in the statement. “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.”
The sale does not include Yahoo’s cash and its shares in the Alibaba Group and Yahoo Japan. Following the announcement, Yahoo’s New York-listed shares rose 0.3 percent in premarket trade, while Verizon’s shares jumped 0.36 percent.