Verizon is winner in Yahoo sale with $4.8B bid

With Verizon's $4.8 billion acquisition of Yahoo, the telecommunications giant hopes to merge it with fellow Web portal pioneer AOL to create a new mobile and online powerhouse.

Verizon will acquire Yahoo's operating business -- advertising technology and popular online content such as Yahoo Sports, Yahoo Finance and Tumblr -- as well as the Yahoo brand and real estate attached to the core business including Yahoo's Sunnyvale, Calif. headquarters, the company announced Monday. 

The wireless provider has been the leading candidate in Yahoo's four-month sale process. By pairing Yahoo with AOL, which Verizon bought in May 2015 for $4.4 billion, Verizon's resulting Net media unit could represent a more competitive option for digital advertisers after Google and Facebook.

“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers," said Verizon CEO Lowell McAdam in a statement announcing the deal. "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.”

That leaves Yahoo with its 15% stake in Chinese retailing giant Alibaba (BABA), worth $32 billion, and its 36% stake in Yahoo Japan, worth about $8 billion. When the transaction is closed -- expected to happen in the first quarter of 2017 -- Yahoo will change its name and become a publicly traded investment company, the company said.
 

Shares of Verizon (VZ) were up 0.05% in pre-market trading to $56.13. Yahoo (YHOO) shares were down 0.74% to $39.09.

While many Wall Street observers had predicted that CEO Marissa Mayer would exit with a Yahoo sale that appears not to be the case. For now, she will be helping with the transition. "For me personally, I’m planning to stay," Mayer said in a note onYahoo's Tumblr page. "I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter."

Yahoo will be integrated with AOL under Marni Walden, Verizon's executive vice president and president of the product innovation and new businesses organization, Verizon said. But AOL CEO Tim Armstrong will be doing the heavy lifting and there's no current decision on Mayer's future role, she said on CNBC Monday.

"Unlike (the acquisition of) AOL where we had an opportunity to plan for leadership ... this has been somewhat of an abnormal process, an auction where we didn’t have a chance to really define leadership about who will be in what seats," Walden said. "So Tim and I will be out with Marissa and her leadership team and her organization later this week … We will come back when we are ready to talk about the leaders in the seat," she said. "But at this point, Tim is leading this integration for us at Verizon and we are very pleased he is doing so."

A former Google exec, Mayer four years ago came to Yahoo -- one of the original Web portals and Net search destinations -- to captain a turnaround. Despite Yahoo growing its mobile advertising business under Mayer's tenure, the company is expected to earn a dwindling share of a growing global digital ad market, according to research firm eMarketer. Yahoo's share of the $187 billion market is expected to drop from 1.5% in 2015 to 1.3% this year, the research firm projects.

“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL," Mayer said in a statement accompanying the sale announcement. "The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”

Verizon acquired AOL in part for its online advertising technology, which can be used online and on mobile video services such as Verizon's free ad-supported go90 network, launched in October 2015, that streams millennial-focused TV, sports and other content to smartphones and mobile devices.

In addition to its valuable ad tech, Yahoo also has popular online content such as Yahoo Sports, Yahoo Finance and Tumblr, the blogging service it acquired in 2013 for $1.1 billion. Across its various properties, Yahoo draws 1 billion monthly users.

Verizon has been circling Yahoo for months. In December 2015, Verizon CEO Lowell McAdam and CFO Fran Shammo said the company would look at Yahoo should it go up for sale. "At the right price I think marrying up some of their assets with AOL under Tim Armstrong's leadership would be a good thing for investors," McAdam told CNBC's Jim Cramer in February.