Verizon Nears Deal to Acquire Yahoo for $5 Billion: Reports

Verizon is closing in on a deal to buy the core Internet business of Yahoo, according to multiple reports Friday.

The two companies are in negotiations on a deal valued at around $5 billion, as first reported by Bloomberg News, beating out bids from a range of other parties. Verizon apparently sweetened its offer: The telco had previously put in a bid of $3 billion, according to the Wall Street Journal.

For Verizon, buying Yahoo would potentially accelerate its ambitions of becoming an Internet-media juggernaut rivaling Google and Facebook. Last year, Verizon snapped up AOL for $4.4 billion and in the last 12 months has entered into other deals to build out its digital-media portfolio, as the telco has looked to diversify beyond its core telecommunications businesses.

The sale would essentially mark the end of the road for Yahoo, the pioneering Internet search and media firm. Founded in 1995 at the dawn of the web era, Yahoo has struggled for more than a decade, and CEO Marissa Mayer initiated the sale process earlier this year under pressure from investors, after her strategies for turning around the company failed to pan out.

A Verizon representative declined to comment. Yahoo didn’t immediately respond to requests for comment.

While Verizon’s talks with Yahoo are at an advanced stage, the deal is not sealed and could still fall apart. Even now, other entities bidders might reemerge , per the WSJ.

Other bidders that stayed in the hunt for Yahoo include AT&T and private-equity giant TPG, according to Bloomberg. Also in the fray was Quick Loans founder Dan Gilbert, who’s also the majority owner of the Cleveland Cavaliers.

Verizon’s proposed deal for Yahoo would exclude the Internet company’s patent holdings, according to Bloomberg. It also does not include Yahoo’s multibillion-dollar stakes in Chinese Internet powerhouse Alibaba Group and Yahoo Japan.

If a deal with Verizon is consummated, Mayer is expected to exit as Yahoo’s CEO. She would receive a severance package worth about $55 million in the event she is terminated within a year of a change in control of the company.

Verizon — which Wall Street has viewed as leading strategic buyer for Yahoo — is expected to merge Yahoo’s operations with AOL, headed by CEO Tim Armstrong. AOL has revved up revenues under Verizon’s wing, posting $669 million for the first quarter of 2016, its biggest Q1 top-line take in five years.

In addition to AOL, Verizon earlier this year formed a 50-50 digital-video joint venture with Hearst, and the JV subsequently bought Complex Media. Verizon also took a 24.5% stake in AwesomenessTV, majority owned by DreamWorks Animation and Hearst holding the remaining equity. And two years ago, Verizon bought Intel’s OnCue over-the-top video division, which formed the basis for its Go90 mobile-first entertainment service.

Mayer, on a call Monday with investors, said the company is “deep in the process” of discussions with prospective buyers and said Yahoo will provide an update “as soon as it is prudent.”

Yahoo this week reported declining sales and a steep loss for the second quarter of 2016, after it recorded charges totaling $482 million for Tumblr, the blogging site it acquired for $1.1 billion in 2013 — the biggest deal under Mayer’s four years at the helm.

At the end of the second quarter of 2016, Yahoo had about full-time 8,800 employees, reaching its goal of cutting 15% of its workforce, down from about 11,000 in the second quarter of 2015. It seems clear that part of the reason for the layoffs was to position the company for a sale.

The financial structure of Verizon’s deal for Yahoo has not been revealed. The telco has about $4.5 billion in cash on hand.

During the second quarter, Yahoo set up a holding company, Excalibur LLC, to explore the sale of more than 4,000 “non-strategic patents and pending applications.”

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