Dive Brief:
- Verizon announced Monday it is purchasing Yahoo's core operating business for $4.83 billion in cash, according to an announcement.
- The deal is expected to close in the first quarter of 2017. Verizon will integrate Yahoo with AOL, which the company acquired last year, under Marni Walden, EVP and President of the Product Innovation and New Businesses organization at Verizon.
- Verizon's acquisition effectively separates Yahoo's internet business—including advertising technology, media assets, mail and search—from the company's holdings in Asia. The deal does not include its Alibaba Group Holdings stake or its Yahoo Japan shares, which are worth about $40 billion, according to Reuters. As of Friday, Yahoo was valued at about $37 billion.
Dive Insight:
Verizon's purchase marks the end of Yahoo as we know it. Yahoo has been on a downward spiral for a number of years as the company has struggled to innovate and expand its market appeal. Yahoo’s first quarter earnings released in April showed that revenue fell 11% to $1.08 billion. In its second quarter, Yahoo had revenue of $1.31 billion, up from $1.24 bill year over year.
Verizon had expressed interest in purchasing Yahoo’s core business, which includes its web portal and mail services, since early this year. Verizon went up against a few other competitors, including private equity firm TPG and AT&T.
For Verizon, Yahoo's assets could combine well with its online business AOL, which the company acquired last year for $4.4 billion. The move also vastly expands Verizon's audience reach, as Yahoo boasts more than 1 billion monthly active users, according to the announcement. The company has also expressed interest in Yahoo's advertising technology tools among other assets, but integrating the two very different companies could prove challenging.
"Yahoo gives us scale and that's what's most critical here," Walden said on CNBC's "Squawk Box." "We go from being in the millions of audience to the billions."
AOL CEO Tim Armstrong will lead the integration. Walden said the company has not yet decided what role Yahoo CEO Marissa Mayer will take once the deal is complete.
