The Long and Winding Road From Yahoo to Altaba

Yahoo will sell its core assets to Verizon and will be renamed Altaba. What led up to the deal, what are the acquisition details and why is Verizon spending additional time trying to figure out if Yahoo is really worth the price.

Under the terms of the deal, Verizon would acquire Yahoo for $4.83 billion in an acquisition agreement that was announced last year. Verizon would obtain Yahoo’s core assets, including its web advertising and media businesses. Verizon would not receive any part of Yahoo’s investments in China-based e-commerce company Alibaba or Yahoo Japan.

Verizon was circling Yahoo for months before it finally secured an acquisition agreement. Verizon has been investing heavily in digital advertising and media over the last several years, and believes Yahoo’s infrastructure and substantial revenue in those markets could help it expand rapidly in that market. Before announcing plans to acquire Yahoo, Verizon bought AOL for similar reasons.

Yahoo CEO Marissa Mayer had no interest in selling the company to the highest bidder. But after trying for four years to turn the company around, board decided it was time to sell. Overshadowed by Google’s success in Web search and advertising, Yahoo has been in decline for the best part of a decade. By shedding Yahoo’s core Web business, the reorganized company could focus on the valuable assets that were left over.

Yahoo’s share of e-commerce giant Alibaba and Yahoo Japan will remain inside a newly formed company named Altaba. The brand, which was announced on Jan. 9, will essentially be a holding company for the investments the firm has in Alibaba and the Japanese Internet company. Altaba will only be formed if Verizon completes the Yahoo acquisition.

Although Yahoo was once worth tens of billions of dollars more, the company’s shareholders are pleased with the Yahoo deal. For one, they’ll be able to get Yahoo’s struggling Web businesses off their books and see some financial benefit from the sale. More importantly, they’ll be able to unlock the full value of Alibaba and Yahoo Japan, potentially allowing them to reap huge profits from their stacks in those businesses. Ultimately, the Verizon deal could be a lucrative one.

Marissa Mayer’s fate was unknown when Verizon announced plans to acquire Yahoo. However, Yahoo said on Jan. 9 that Mayer will resign from her CEO post upon the successful completion of the Verizon deal. Altaba, then, will need a new chief executive.

In the beginning, the Yahoo-Verizon deal seemed simple, but now, it’s anything but simple. Yahoo announced last year that it was the victim of a hack that saw user data stolen from 500 million people. Soon after, Yahoo announced a separate attack that affected 1 billion users. Although the hacks occurred years ago, the revelations came at a terrible time for Yahoo. And now Verizon is trying to determine whether they matter.

According to the terms of the deal, Verizon reserves the right to extricate itself from any deal with Yahoo if it determines that the data breaches compromises the value of the deal. While it’s appears unlikely that Verizon will back out of the deal at this point, it can do so if it so wishes. Yahoo is hoping it won’t.

Verizon is currently analyzing the nature of the breaches and how they might affect its business. But according to some reports, Verizon has said that it might request to take at least some cash off the deal and one report pegged the concession at $1 billion. Yahoo could decline that offer, but whether it could get full price from another company is unknown.

One of the biggest questions surrounding the Yahoo-Verizon merger is when the deal might close. As noted, Verizon is still analyzing the impact the security breaches had on Yahoo’s business and until that investigation is complete, it’s unlikely the deal will close. Verizon appears to be in no rush to complete its Yahoo buy.