Verizon Communications Inc. will announce an agreement to buy Yahoo! Inc. for about $4.8 billion on Monday morning — before NYSE trading begins — in a deal that challenges the Internet oligopoly of Facebook and Google.
Verizon is the world’s second largest global telecom company, and is the ideal partner to buy Yahoo’s internet assets and then to combine with the AOL properties that it bought last year for $4.4 billion. The deal does include Yahoo’s large real-estate assets in Silicon Valley, but does not include the company’s intellectual property and stakes in Alibaba and Yahoo Japan.
It appears that other players, including an investor group led by Quicken Loans’ Dan Gilbert and private equity firm TPG would have bid more, according to the Recode blog.
But Verizon’s compelling pitch to Yahoo’s Board of Directors was that they already operate in similar businesses, there is no financing contingency, and the scale of the combined advertising tech assets is a credible threat to challenge the Facebook and Google oligopoly.
Yahoo CEO Marissa Mayer will get little credit for saving Yahoo and liquidating the company for about the same $44.6 billion that Microsoft bid that Yahoo’s CEO Jerry Yang turned down in 2008. With the stock market tanking in the “Great Recession” and Yahoo disastrously having gone through 3 new CEOs in four years, Mayer was hired in July 2012 with the stock at $15. The share price has never been lower.
What few analysts appreciate and Verizon craves is Yahoo’s so called “MaVeNS” (mobile, video, native and social operations) assets that Mayer grew from the ground up to generate revenue that from video live-streaming of news events that brings traffic to the site. Yahoo just reported video stream engagement growing by 88 percent year-over-year.
Marissa Mayer and AOL’s CEO Tim Armstrong both worked together at Google and two years ago, Mayer rejected Armstrong’s efforts two years ago to merge their two companies. Armstrong negotiated the AOL merger with Verizon and now will be swallowing Yahoo.
Yahoo gives Verizon, a major cable provider, a way to participate and be hedged as television dollars are bled off by live-streaming. With MaVeNS revenue up at a blistering 27 percent to $504 million over the last 12 months, Verizon’s size and financial capability can increase MaVeNS growth rate.
If the deal closes, Verizon will be able to immediately add millions of daily users to its stable of media properties and would benefit through better cross-selling to advertisers. Bloomberg reported that Verizon’s spokesman and Yahoo spokeswoman did not respond to a request for comment.