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Sources say front-runner in Yahoo auction is Verizon


07/23/2016


Sources say front-runner in Yahoo auction is Verizon
After reviewing final bids that it received this week, Yahoo Inc is focusing on U.S. telecommunications company Verizon Communications Inc, several sources weee quoted in the media as saying.
 
By giving it access to Yahoo's advertising technology tools, as well other assets such as search, mail, messenger and real estate, a deal would boost Verizon's AOL internet business, which the company acquired last year for $4.4 billion. Verizon has been made the favorite among industry analysts to prevail in the auction due to these synergies.
 
Yahoo would be left only with a 35.5 percent stake in Yahoo Japan, as well as its 15 percent interest in Chinese e-commerce company Alibaba Group Holding Ltd and would mark the end of Yahoo as an operating company if the deal goes through. Most of Yahoo's $37 billion market capitalization is comprised of those two stakes.
 
Sources said that no agreement has yet been reached between the two companies even as negotiations are continuing ad Verizon is viewed b Yahoo as the buyer that can deliver the most value. The sources added that a deal for the core assets would like to be completed by Yahoo by the end of July.
 
The companies were discussing a price close to $5 billion, reported Bloomberg News citing an anonymous source. While Verizon rose shares 1.3 percent to $56.09, Yahoo shares were up 0.6 percent at $39.09 in morning trading.
 
"Verizon has always been the favorite because it has the largest potential synergies and therefore can pay the most. The price negotiations still can be tough because it also doesn't need Yahoo. It can put its money into its AOL franchise," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "
 
Through its go90 ad-supported mobile video service targeted at millennials, Verizon is already working on increasing revenue. In addition to basketball and football games, videos from Comedy Central, Vice and other programmers are offered by the app which was introduced in October.
 
Private equity firm TPG Capital LP; and a consortium of buyout firms Vector Capital and Sycamore Partners and Verizon rival AT&T; a consortium led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett are the other bidders for the Yahoo assets.
 
Highly regarded in the advertising community is AOL Chief Executive Officer Tim Armstrong, who made his name leading sales at Alphabet Inc's Google. Yahoo CEO Marissa Mayer, another former Google high-flyer who has struggled to turn her internet company around, would not probably join at AOL, analysts say.
 
After investors fretted over whether that transaction could have been carried out on a tax-free basis, Yahoo scrapped plans to spin off its Alibaba stake in December. Instead, spurred on by activist hedge fund Starboard Value LP, Yahoo decided to explore a sale of its core assets.
 
In April, Yahoo said that it board would be joined immediately by Starboard CEO Jeffrey Smith and three independent directors associated with him. Starboard had proposed to oust Yahoo's entire board.
 
(Source:www.reuters.com)