The board of Silicon Valley-based Yahoo agreed to sell the bulk of its core Internet operations to telecom giant Verizon in a deal worth $4.8 billion, subject to customary closing adjustments, both companies announced Monday.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers. 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,” Verizon chairman and CEO Lowell McAdam said.
Yahoo will be integrated with AOL under Marni Walden, EVP and president of the product innovation and new businesses organization at Verizon. The valuation represents the sinking fortunes for the online pioneer, which launched as a directory of websites in 1994 and was worth as much as $125 billion six years later. But it found itself outmaneuvered by younger companies like Google and Facebook, which moved beyond the basic web advertising model into apps, search and social networking.
Last Monday, Yahoo reported earnings that coincided with Wall Street’s low expectations for the second quarter of 2016, but CEO Marissa Mayer claimed the company was making strides.
“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. 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,” Mayer said. “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.”
Mayer continued: “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. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”
Mayer’s pay in 2015 was $35.9 million, representing a 14.5 percent drop from the Yahoo CEO’s compensation in 2014, but she is expected to receive a $55 million golden parachute when the deal is finalized.
The agreement is subject to closing conditions, approval by Yahoo’s shareholders, and regulatory approvals. The deal is expected to close in the first quarter of 2017. Until the closing, Yahoo will continue to operate independently, offering and improving its own products and services for users, advertisers, developers and partners.
The deal does not include Yahoo’s cash, shares in Alibaba Group Holdings, shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio). These assets will continue to be held by Yahoo, which will change its name at closing and become a registered, publicly traded investment company.