Media M&A: Verizon amends terms of the Yahoo deal, reduces the final price by $350M
Final price comes in at $4.48 billion, a good chunk of change, but not nearly the size of other big tech deals concluded during the days of the Internet bubble
The Verizon acquisition of Yahoo looks like it will now go through now that it has amended its terms for the deal, lowering the final price by $350 million to $4.48 billion. When it comes to bad mergers and acquisitions, this amendment is all for show as it barely alters the price.
“We have always believed this acquisition makes strategic sense. We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo’s tremendous talent and assets into our expanding portfolio in the digital advertising space,” said Marni Walden, Verizon executive vice president and president of Product Innovation and New Businesses.
The reality is that Verizon felt it needed to buy a company in the digital ad space, and one with a large enough audience to justify the deal. From this perspective Verizon needed the deal, if even a lot of other people see Yahoo as damaged goods.
On the bright side, this deal is small change compared to the AOL deal with Time Warner. That one was valued at $160 billion and occurred because AOL’s stock price was bloated thanks to the Internet bubble. Just about everyone recognized that it was a bad deal at the time, and those that didn’t, the true believers, thought so too once the bubble burst that year.
This deal is not that bad. In fact, thanks to the AT&T – Time-Warner deal on the table, this one is really not the focus of everyone’s attention.
Still, I think Yahoo is damaged goods, but at least the acquiring player is Verizon now, not the other way around.
Here is Verizon’s announcement:
NEW YORK, NY and SUNNYVALE, CA – Verizon Communications Inc. (NYSE, Nasdaq: VZ) and Yahoo! Inc. (Nasdaq: YHOO) today announced that they have amended the existing terms of their agreement for the purchase of Yahoo’s operating business.
Under the amended terms, Verizon and Yahoo have agreed to reduce the price Verizon will pay to acquire Yahoo’s operating business by $350 million. In addition, Verizon and Yahoo will share certain legal and regulatory liabilities arising from certain data breaches incurred by Yahoo.
Marni Walden, Verizon executive vice president and president of Product Innovation and New Businesses, said: “We have always believed this acquisition makes strategic sense. We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo’s tremendous talent and assets into our expanding portfolio in the digital advertising space.”
Walden added, “The amended terms of the agreement provide a fair and favorable outcome for shareholders. It provides protections for both sides and delivers a clear path to close the transaction in the second quarter.”
Marissa Mayer, CEO of Yahoo, said: “We continue to be very excited to join forces with Verizon and AOL. This transaction will accelerate Yahoo’s operating business especially on mobile, while effectively separating our Asian asset equity stakes. It is an important step to unlock shareholder value for Yahoo, and we can now move forward with confidence and certainty. We have a terrific, loyal, experienced team at Yahoo. I’m incredibly proud of our team’s strong product and financial execution in 2016, setting the stage for a successful integration.”
Under the amended terms, Yahoo will be responsible for 50 percent of any cash liabilities incurred following the closing related to non-SEC (Securities and Exchange Commission) government investigations and third-party litigation related to the breaches. Liabilities arising from shareholder lawsuits and SEC investigations will continue to be the responsibility of Yahoo.
Also under the amended terms, the data breaches or losses arising from them will not be taken into account in determining whether a “Business Material Adverse Effect” has occurred or whether certain closing conditions have been satisfied.
Verizon’s acquisition of Yahoo – now valued at approximately $4.48 billion in cash, subject to closing adjustments – is expected to close in second-quarter 2017.
On July 23, 2016, Verizon and Yahoo entered into a definitive stock purchase agreement under which Verizon would acquire Yahoo’s operating business and global audience of more than 1 billion users, including more than 600 million mobile users.
Adding Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands, with extensive technology-powered distribution capabilities. It will enhance Verizon’s growth strategy of providing a cross-screen connection for consumers, creators and advertisers.