Verizon Communications Inc. is reportedly offering $3 billion for the core internet business of troubled Yahoo! Inc. in the second round of bids. The U.S. telecom company appears to be the leading bidder, The Wall Street Journal reported, citing people familiar with the matter. Monday was the closing date for the second round of offers. According to the report, Yahoo is likely to hold at least one additional round of bidding.
Verizon’s Interest in Yahoo
Verizon started courting Yahoo’s core business in December. CFO Fran Shammo hinted the company was mulling if a strategic fit with Yahoo’s assets existed. These holdings include mail, advertising technology, sports and news sites.
There were reports that Verizon is hiring Bank of America (BofA) to take an advantage over other competitors in its bidding. BofA was Yahoo’s lead adviser in Alibaba’s spinoff plan last year. The bank could also help Verizon in financing the deal.
The telecom’s investment banks team includes Guggenheim Partners LLC, LionTree LLC and Allen & Company.
Yahoo, under pressure from activist investor Starboard Value, is seeking buyers for its core business. The company put the business up for sale in February. For the first quarter, Yahoo booked a loss of $99 million on revenue of over $1 billion.
Yahoo Shouldn’t Brush Away Verizon’s Bid
According to people with knowledge of the matter, Yahoo received more than 10 initial offers ranging from about $4 billion to $8 billion. Bidders included Verizon Communications Inc. , YP Holdings LLC, TPG, and a consortium led by Bain Capital LP and Vista Equity Partners LLC. SoftBank isn’t a candidate for Yahoo’s core Internet business, but the company may enter into discussions with any buyer that wants to also acquire the Yahoo Japan Corp.
A report from The Wall Street Journal suggested that private equity firm TPG is also expected to submit its bid in the second round.
Earlier, Bloomberg reported that AT&T Inc. (NYSE:T) is also taking part in the bidding for Yahoo’s core assets. This was a surprising news because the telecom had previously shown no interest in Yahoo’s core business.
The auction for Yahoo’s core business is expected to draw bids of around $2 billion-$3 billion, versus previous expectations for $4 billion-$8 billion, according to a report from The Wall Street Journal.
As we reported previously, Yahoo shouldn’t brush away Verizon’s bid, given the company’s successful venture into Internet content sphere through the AOL acquisition. Verizon acquired AOL last year for $4.4 billion. The telecom gave AOL CEO Tim Armstrong a free hand to run things as he likes. Other acquisition that the company made was Microsoft Corporation’s proprietary advertising technology division.
According to reports, Twitter Inc (NYSE:TWTR) held merger talks with Yahoo!’s management team, but the companies were unable to make a deal. The management teams of both struggling companies met for several hours, looking at Yahoo’s financial situation and whether a strategic combination might make sense, The New York Post reported, citing sources familiar with the matter. CEO Marissa Mayer led the Yahoo’s executive team, but Twitter CEO Jack Dorsey decided not to attend the meeting.
Shares of Verizon Communications Inc. closed down 0.43% on Monday.