The waiting game is over: Verizon officially announced an agreement to acquire Yahoo's flagging Internet search and advertising business in a deal worth $4.83 billion in cash.
If it's not exactly a match made in heaven, it's a marriage of opportunity for both parties. Verizon will combine the operations of AOL with Yahoo, two longtime rivals that were frequently said to be merger rumors over the years, to expand its stable of online-media properties. Verizon snapped up AOL last May for $4.4 billion.
"Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers," Lowell McAdam, Verizon chairman and CEO, said in 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."
The deal, subject to closing conditions including approval by Yahoo's shareholders and regulators, is expected to close in the first quarter of 2017. Yahoo has a global audience of more than 1 billion monthly active users, including 600 million on mobile devices, through search, communications and digital content products.
Under Verizon, Yahoo's 21-year-old brand will live on. But some investors in the once-mighty webco -- once worth north of $125 billion during the late-'90s Internet bubble -- are sure to be unhappy with the price tag. Still, the company will find a home for many of its employees and technologies; Yahoo had a headcount of 8,800 at the end of June, a 20% reduction from a year prior.
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Yahoo will be integrated with AOL under Marni Walden, Verizon's exec VP and president of product innovation and new businesses. Marissa Mayer, who has been Yahoo's chief executive officer for the past four years and failed to execute turnaround strategies, for now will remain CEO of Yahoo -- which will change its name after the close of the Verizon deal and become a publicly traded investment-holding company.
"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 prepared statement. "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."
The sale to Verizon does not include Yahoo's cash, its equity investments in Alibaba Group Holdings or Yahoo Japan, Yahoo's convertible notes, certain minority investments, or Yahoo's non-core patents. Those assets will continue to be held by Yahoo, which set up an entity called Excalibur LLC to explore the sale of more than 4,000 "non-strategic" patents and pending applications.
AOL CEO Tim Armstrong, for his part, said "Yahoo has been a longtime investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance." Under Armstrong, AOL has invested in and grown content brands including the Huffington Post, TechCrunch and Engadget, and has launched programmatic ad-buying platforms.
Verizon has now bought two erstwhile heavyweights of the Internet, worth well over $300 billion at one point, for less than $10 billion. In 2000, AOL, which had a peak market cap of about $222 billion, had the clout to acquire Time Warner.
Under Mayer, a former top Google executive, Yahoo tried various strategies to drive revenue growth, including its $1.1 billion deal for Tumblr that failed to pay off. Mayer also doubled down on building up Yahoo's search business, investing millions in search deals and in mobile-search tech, on the belief that it was an area of critical importance for the company. But costs for
The Yahoo name is an acronym that stands for "Yet Another Hierarchical Officious Oracle." One of the earliest website directories, it was founded by Jerry Yang and David Filo, who were Stanford U. students at the time.
Verizon is scheduled to report second-quarter 2016 earnings results on July 26.