Verizon Communications Inc. (NYSE: VZ) is about to acquire Yahoo! Inc’s Internet assets including advertising, search, and content platforms. Verizon did not confirm any detail about the transaction on Friday. Sources said the company would pay $5 billion.
Earlier in April, sources reported that Britain’s Daily Mail had been in negotiations with the American company. Bloomberg said on Friday that Verizon might have won the competition among investors. The transaction could include Yahoo’s patents. Verizon would announce the deal in the coming days, although the formal acquisition might take longer. Roger Entner, an analyst at Recon Analytics LLC, said that Verizon is the buyer that would obtain more benefits from purchasing Yahoo.
Investors have demonstrated interest towards Yahoo over the last months after Marissa Mayer, the company’s Chief Executive Officer, opened the door for selling its principal assets. Companies such as AT&T and Quicken Loans Inc. were also involved in the bidding.
Verizon wants to enter the market segment of Internet advertising. The telecommunications company acquired AOL last year for $4.4 billion to compete with the Kings Google and Facebook Inc, said Bloomberg. AOL is the owner of popular content sites such as the Huffington Post.
Yahoo has more than 200 million unique visitors per month and is the owner of popular sites such as Tumblr, Yahoo Finance, Yahoo Sports, Yahoo Weather and Flickr. Verizon would join forces with AOL and Yahoo to have access to a broader segment of people.
“This will expand Verizon’s advertising base by 200 million more visitors. This will be a large driver of the advertising engine. They also can collect a whole lot more user data to make the ads more relevant. They will be in more places with better ads,” Entner told Bloomberg.
BREAKING: Verizon is the leading bidder for Yahoo and sale could take place next week
— The Int'l Spectator (@intlspectator) July 22, 2016
Two years ago Yahoo! Denied to merge with AOL, now both businesses could be part of the same company
The new transaction is being led by Yahoo board member Tom McInerney. Sources told ReCode that Verizon would “swallow the deal without a lot of trouble.” The telecommunications company had offered a lower bid earlier on the week.
Two years ago, AOL CEO Tim Armstrong told Yahoo CEO Mayer to unite the companies. The latter rejected the offer. Both executives would work now for the same company. Yahoo would still consider bets from other investor groups.
A deal with Verizon would include Yahoo’s 2,600 technical patents, which are valued at $1 billion, as reported by TechCrunch, which is owned by AOL and Verizon. Yahoo shares were up 1.31 percent by 3:30 p.m. EDT to $39.36.
Investors at Verizon might have shown concern about costs implied in the transaction. The telecommunications company has been focusing exclusively on the wireless business, said the Wall Street Journal.
70 percent of Verizon’s revenues in 2015 came from wireless businesses. The company has an estimated 112 million subscribers in the United States, of which a major segment has acquired high-end smartphones. The company is expected to announce Q2 earnings next week.
— Paul R. La Monica (@LaMonicaBuzz) July 22, 2016
Yahoo would be negotiating a partnership with Apple in the search business
Mayer announced Yahoo’s latest earnings on Monday. The Stanford graduate and Yahoo president remarked that most of the company’s revenues come from partnerships with other tech companies. She included Apple among those companies.
Investors seemed impressed about Mayer’s declarations since Yahoo had not previously announced any deal with the company led by Tim Cook. Shareholders said that they were interested in having details about possible negotiations with Apple.
A spokesperson for Yahoo told Business Insider that Apple has always allowed users to set Yahoo Search as their default search motor on Safari. The spokesperson declined to provide further information about possible economic implications.
“With Search making up more than half of our GAAP revenue, it remains an important area of our business. Today, our search business is built on strong partnerships with Microsoft, Google, Mozilla, Apple, and Oracle, among others,” Mayer was quoted as saying by Business Insider.
The Wall Street Journal suggested in 2013 that the Cupertino based company would be in negotiations with Meyer to include Yahoo searches in Siri. Currently, Apple’s voice assistant uses Microsoft’s Bing as default search engine.
Yahoo would also be interested in replacing Google as the default search bar on iOS devices. The company led by Sundar Pichai paid Apple $1 billion in 2014 for searchers made through iPhone devices.
Yahoo would bring benefits to Verizon, which is planning to expand its catalog among subscribers of Internet and TV services. However, the company would still face some complications at integrating ad platforms. This process could take a few months.
Verizon nearly owns the entire 90s Internet https://t.co/bSognzefqn
— Anthony De Rosa (@Anthony) July 22, 2016