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Verizon is paying US$4.8 billion to acquire Yahoo’s core business

By Koh Wanzi - on 25 Jul 2016, 5:12pm

Verizon is paying US$4.8 billion to acquire Yahoo’s core business

Image Source: Yahoo

Yahoo has had a really hard time in recent years, but the days of struggle for the beleaguered internet company look to be drawing to a close. The company’s board has now agreed to sell Yahoo’s core internet business and real estate holdings to Verizon for US$4.8 billion, ending what was a fairly lengthy auction process.

The price of the sale marks a remarkable fall for the erstwhile internet giant – at the height of the dot-com boom, the Silicon Valley company was valued at a staggering US$125 billion.

For Verizon, the deal is simply part of the telecommunications company’s efforts to build its digital media and advertising business. Just last year, Verizon snapped up AOL for US$4.4 billion.

However, Yahoo CEO Marissa Mayer is unlikely to join Verizon, with The New York Times reporting that she could receive up to US$57 million in severance pay.

Having said that, Verizon reportedly intends to keep the Yahoo brand, and the idea is to combine the advertising assets of both companies and take on current leaders Facebook and Google. Still, this would be little more than a third alternative to the latter two giants – data firm eMarketer estimates that Google and Facebook will account for more than half of the US$69 billion US digital ad market in 2016.

John Colley, a professor and specialist in large takeovers at Warwick Business School, also cautioned against taking the deal as a sign that a new advertising giant is being born. “Unfortunately ‘Alliances of the Weak’ in an attempt to make a single strong competitor very rarely work. They are usually left with a bigger ‘weak’ player,” he said.

In the aftermath of the sale, Yahoo will also need to decide what to do with its stakes in Yahoo Japan Corp. and Alibaba, both of which make up the lion’s share of Yahoo’s approximately US$36 billion market valuation.

Source: The New York Times

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