Verizon Communications (NYSE:VZ) announced on Monday that it had submitted the winning bid to buy Yahoo’s core internet business. Verizon is paying $4.83 billion in cash for the deal, which is expected to close in early 2017. On top of the purchase price, Verizon will pay $1.1 billion to cash out Yahoo employees’ restricted stock. The deal was reached over the weekend.
Yahoo shareholders will still own shares in what is left of the company after the close of the deal. Those assets include a 15 percent stake in the Chinese internet company Alibaba, currently worth about $32 billion, and a 35.5 percent stake in Yahoo Japan, worth about $8.7 billion. The deal does not include Yahoo’s cash and Yahoo’s noncore patents. Yahoo is still in the process of selling those patents.
The Yahoo purchase will help Verizon bolster its meager digital content for consumers. Lowell C. McAdam, Verizon’s chairman and chief executive, said in a statement, “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 is currently the No. 1 wireless operator in the United States. The company, well known for its wireless phone and internet services, has little experience in the digital content business. Yahoo’s consumer services, including search, news, finance, sports, video, email and the Tumblr social network, will be added to its portfolio.
With the deal, the company is expected to take third in digital advertising revenue, behind Google and Facebook. The acquisition unites two titans of the early internet, AOL and Yahoo, both of which have struggled to compete on their own. Verizon bought AOL for $4.4 billion last year.
Yahoo has been run as an independent entity for 22 years. When launched in 1994, Yahoo became the front door to the web for a generation of internet users. For years, Yahoo straddled the line between being a technology company and being a media company. Yahoo’s fortunes began to decline as it missed out on the social media and mobile revolutions and made a series of bad deals that cost the company a lot of money.
Yahoo’s chief executive, Marissa Mayer, spent the last four years trying to create a viable strategy for the company. However, her efforts met with little success. Ms. Mayer remarked that she intended to “see Yahoo into its next chapter.” She will assist with the transition until the sale is complete. However, her role after the merger remains unclear. If she is terminated, she would be due a severance package of about $57 million.