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Verizon selling Yahoo and AOL to private equity firm for $5 billion

Verizon to sell Yahoo and AOL to private equity firm
Verizon to sell Yahoo and AOL to private equity firm for $5 billion 00:23

AOL and Yahoo are being sold again, this time to a private equity firm. Verizon will sell Verizon Media, which consists of the pioneering technology platforms, to Apollo Global Management in a $5 billion deal.

Verizon said Monday that it will keep a 10% stake in the new company, which will be called Yahoo — omitting the brand name's exclamation point that has endured, arguably past its prime, for so many years.

"Dropping the infamous '!' at the end of the Yahoo moniker, Apollo is signaling a shift in direction," Raymond James analysts said Monday in a note to investors. "With an impressive count of daily users, including a significant and extremely sticky base of email customers .... the PE guys have a good opportunity to mine cash while shifting the business in favor of newer online trends, and we expect a full rebranding is in store."

Yahoo at the end of the last century was the face of the internet, preceding the behemoth tech platforms to follow, such as Google. And AOL was the portal, bringing almost everyone who logged on during the internet's earliest days online. But that was then, as the AOL name will also disappear from the new operation.

Dashed hopes

Verizon had hoped to ride the acquisition of AOL to a quick entry into the mobile market, spending more than $4 billion on the company in 2015. The plan was to use the advertising platform pioneered by AOL to sell digital advertising. Two years later, it spent even more to acquire Yahoo and combined the two.

However, the speed at which Google and Facebook have grown dashed those hopes, and it quickly became clear that the new endeavor was unlikely to reach Verizon's highest aspirations for the two.

The year after buying Yahoo, Verizon wrote down the value of the combined operation, called "Oath," by more than the $4.5 billion it had spent on Yahoo.

As part of the deal announced Monday, Verizon will receive $4.25 billion in cash, preferred interests of $750 million and the minority stake. The transaction includes the assets of Verizon Media, including its brands and businesses such as Yahoo and AOL.

The deal includes all Verizon Media brands and businesses and nearly 900 million monthly active users worldwide. 

Current Verizon Media CEO Guru Gowrappan will continue as CEO.

"Right thing for Verizon"

"Strategically this is the right thing for Verizon to do," according to equity analysts at New Street Research. "The media business has no material value to its other businesses. It allows Verizon [management] to focus attention and resources on wireless."  

"The transaction also creates a strong strategic contrast with AT&T, which is doubling down on investments in its media properties and walking off the field in wireless," the analysts added.

The deal is expected to close in the second half of the year.

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