Verizon emerges as front-runner in Yahoo auction: sources

Fri Jul 22, 2016 11:29am EDT
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By Greg Roumeliotis and Liana B. Baker

(Reuters) - Yahoo Inc YHOO.O is focusing on U.S. telecommunications company Verizon Communications Inc (VZ.N: Quote) as the buyer of its core business after reviewing final bids that it received this week, people familiar with the matter said on Friday.

A deal would boost Verizon's AOL internet business, which the company acquired last year for $4.4 billion, by giving it access to Yahoo's advertising technology tools, as well other assets such as search, mail, messenger and real estate. These synergies have made Verizon the favorite among industry analysts to prevail in the auction.

The sale would also mark the end of Yahoo as an operating company, leaving it only as the owner of a 35.5 percent stake in Yahoo Japan, as well as its 15 percent interest in Chinese e-commerce company Alibaba Group Holding Ltd (BABA.N: Quote). Those two stakes account for most of Yahoo's $37 billion market capitalization.

Yahoo views Verizon as the buyer that can deliver the most value, but negotiations between the two companies are continuing, and no agreement has yet been reached, the sources said. Yahoo would like to have a deal for the core assets by the end of July, one of the sources added.

Bloomberg News, which reported earlier that Verizon was nearing an agreement to buy the Yahoo assets, cited an anonymous source as saying the companies were discussing a price close to $5 billion. Yahoo shares were up 0.6 percent at $39.09 in morning trading, while Verizon rose 1.3 percent to $56.09.

The sources requested anonymity because the negotiations are confidential. Verizon and Yahoo did not respond to requests for comment.

"Verizon has always been the favorite because it has the largest potential synergies and therefore can pay the most," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "The price negotiations still can be tough because it also doesn't need Yahoo. It can put its money into its AOL franchise."

Verizon is already working on increasing revenue through its go90 ad-supported mobile video service targeted at millennials. The app, which was introduced in October, offers videos from Comedy Central, Vice and other programmers, as well as basketball and football games.   Continued...

A Yahoo logo is displayed on a monitor in this photo illustration in Encinitas, California, April 16, 2013.  REUTERS/Mike Blake/File Photo