Verizon Communications Inc. (NYSE, NASDAQ: VZ) and Yahoo! Inc. (NASDAQ: YHOO) say that the former has won the auction to acquire the latter. Verizon has agreed to buy Yahoo's operating business for approximately $4.83 billion in cash, subject to customary closing adjustments. The pair expect the transaction to close in the first quarter of next year.
Yahoo will retain its 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 (known as the Excalibur portfolio). The company will change its name once the transaction closes and become a registered, publicly traded investment company. Yahoo intends to return substantially all of its net cash to shareholders.
Verizon plans to pair the new assets with those it purchased from AOL (see "Wireless, OTT video at heart of Verizon's AOL buy") under Marni Walden, Verizon executive vice president and president of the company's Product Innovation and New Businesses organization. The company expects to be able to reach more than a billion users through the combined assets. The acquisition also will bring several digital advertising platforms, including Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising product.
"Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators, and advertisers. 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," predicted Lowell McAdam, Verizon Chairman and CEO.
The deal is expected to strengthen Verizon's mobile content strategy. Yahoo reaches 600 million active mobile users, Verizon says.
"Yahoo and AOL popularized 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," said Marissa Mayer, CEO of Yahoo. "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 $1.6 billion in GAAP revenue in 2015. I'm excited to extend our momentum through this transaction."
Yahoo launched an auction for the company this past February after concluding that it could not reverse revenue and profit slippage on its own. According to Reuters, Verizon topped bids from AT&T; a group headed by Quicken Loans founder Dan Gilbert with support from Warren Buffett; private equity firm TPG Capital Management LP; and a pairing of buyout firms Vector Capital and Sycamore Partners.
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