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Yahoo reveals possible takeover by Verizon

April 14th, 2016

 

Verizon Communications Inc. plans to make a first-round bid for Yahoo Inc.’s Web business, and is willing to acquire the company’s Yahoo Japan Corp. On the other hand, Google, the main division of Alphabet Inc., is also considering bidding for Yahoo’s core business.

 

Other potential suitors including AT&T Inc. and Comcast have decided against bidding, while Time Inc. is still evaluating a bid, and others are planning to make a run at the business, either alone or by backing a strategic acquirer, reported Bloomberg.

 

While the buyout firms haven’t yet paired themselves with a strategic buyer, they are open to the idea of doing so. Yahoo has extended the deadline for first-round bids by a week to April 18, according to The Washington Post.

 

Shares of Yahoo Japan jumped 6.4 percent in Tokyo, the biggest gain in almost three months. Yahoo shares fell 1.3 percent to $36.17 in New York on Thursday, The New York Times reported.

 

Additionally, Verizon and its subsidiary AOL Inc. are working with at least three financial advisers on the Yahoo bid.

 

Hiring numerous banks is a sign that Verizon is serious about its takeover plans; Verizon told Bloomberg that it has said since late last year that it was interested in buying some or all of Yahoo.

 

Verizon, which has a market value of about $213 billion, could give the Yahoo Japan stake to its shareholders or sell it.

 

However, the Sunnyvale, California location for Yahoo Inc. would prefer to sell its 35.5 percent stake in Yahoo Japan, worth about $8.5 billion, along with the core business, Bloomberg reported last month.

 

Verizon values Yahoo’s core business at less than $8 billion. Verizon, as well as other private equity firms, met with Microsoft last month to talk about potential funding for a bid.

 

Microsoft hasn’t committed any funding and is unlikely to provide anything more than a token investment to the winning bidder The Washington Post reported.

 

Yahoo’s projected revenue will drop almost 15 percent and earnings by more than 20 percent for 2016, according to The New York Times.

 

Verizon would replace Yahoo Chief Executive Officer Marissa Mayer with AOL CEO Tim Armstrong and Marni Walden, Verizon’s executive vice president, who would run a combined Yahoo and AOL.

 

For the past few months, Yahoo said it would explore strategic alternatives, including selling its main Internet operations, earlier this year after scrapping a long-time plan to spin off its valuable Asian assets.

 

The company’s stock has declined about 20 percent in the past 12 months as turnaround efforts led by CEO Mayer stalled and sales have sagged, leaving the company vulnerable to activist investors according to Bloomberg.

 

Activist Starboard Value, a longtime Yahoo critic, said in this past March it was fed up with the Web portal’s leadership and called for the board to be completely replaced reported Bloomberg.

 

The current board can’t be trusted to weigh the options that will best serve investors, and it’s important for the activist to be involved to ensure a “full and fair sale process,” according to a letter from Starboard CEO Jeffrey Smith on  the Yahoo Inc.’s website.

 

It is projected that the official bidding of Yahoo Inc. will be in the coming months with Verizon and Google being the top two choices.

 

The bidding nominations will close by mid-April to reduce the number of potential bidders on Yahoo who may not have economic power nor the money to acquire Yahoo. Currently, with how the potential bids have been looking to Yahoo, it appears that Verizon could be the winner of  acquiring Yahoo reported Bloomberg.

 

Editor’s Note: Information from Bloomberg, The New York Times, Yahoo Inc.’s website and The Washington Post was used in this report.