Verizon Is Preparing To Bid For Yahoo’s Internet Business. How Much Is It Worth?
Verizon (NYSE:VZ) will make a first round bid for Yahoo’s core internet business next week, according to Bloomberg News. The communications behemoth is apparently willing to acquire Yahoo’s stake in Yahoo Japan Corp. as well in order to give it an edge over other potential suitors who could include Google, Time Inc and private equity funds Bain and TPG. [1] Below, we review why Verizon might be interested in Yahoo’s internet assets and also estimate the potential valuation for the same.
We have a $53 price estimate for Verizon, which is roughly in line with the current market price.
See our complete analysis for Verizon
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Why Is Verizon Interested In Bidding For Yahoo?
- Verizon has been focusing on building its mobile ad capabilities as it looks to grow beyond the slowing U.S. wireless market. By acquiring Yahoo, it could strengthen its position in the search engine and native advertising market, complementing the programmatic and video ad platform it acquired with its purchase of AOL last year.
- Yahoo has 1 billion+ monthly active users on its flagship online services such as Yahoo Search, Mail, Finance and Tumblr. These properties could provide a relatively valuable audience for mobile advertisers.
- Yahoo has also been investing significantly in content, with a current focus on four verticals — news, finance, sports and lifestyle. This could bolster content offerings on go90 – Verizon’s recently launched mobile-video service.
What Are Yahoo’s Core Business & Yahoo Japan Investment Worth?
We currently value Yahoo’s core internet business – which includes search, display and other advertising segments – at roughly $4.1 billion (see table). We estimate that its 34% stake in Yahoo Japan is valued at roughly $8.25 billion, although the value net of taxes used in our valuation stands at about $5.9 billion. (See our complete valuation model for Yahoo) This implies that Verizon may need to pay upwards of $12 billion to acquire Yahoo along with its Yahoo Japan investment, excluding any premiums.
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Notes:- Verizon to Proceed With Yahoo Bid, Google Weighs Offer, Bloomberg, April 2016 [↩]