The deadline for the preliminary bids for the core business of Yahoo has ended. According to a report by WSJ, contrary to the reports of as many as 40 companies applying for the bid, only a handful of companies have applied. While major suitors such as Alphabet, Time Inc, AT&T, Comcast Corp. backed out from the bid process, US Telecom giant Verizon has emerged as the top contender to buy Yahoo.
In addition to Verizon, Japanese online retailer Rakuten Inc, YP Holdings and private equity firms Apax Partners, TPG Capital LP, Bain Capital, Apollo Global Management and Warburg Pincus have also submitted their bids in first round.
YP Holdings, the firm behind Yellow Pages backed by AT&T and one of the biggest U.S. digital advertising companies, is reportedly a close contender next to Verizon among others.
Yahoo is still reviewing the preliminary offers and hopes to complete the auction process by June before its annual shareholders’ meeting.
According to people familiar with the matter, Verizon has submitted its bid after discussions with three banks namely Guggenheim Partners, LionTree and Allen & Company, signifying its seriousness to buy Yahoo. Verizon expects to boost its video services and online ad business by making use of the advertising platforms of Yahoo.
For the similar reason, last year it had acquired AOL for $4.4 billion. It is reportedly planning to reinvent itself and develop a digital advertising platform by combining customer data from smartphones with advertising inventory on AOL (and probably Yahoo) and ultimately compete with Web giants such as Facebook and Google.
Moreover, Verizon will get an additional ready-made user base of Yahoo as 1 billion users still visit Yahoo and its media platforms regularly for things like sports scores, financial news or use other Yahoo services such as email, photo-sharing, etc.
This amount of customer data could prove immensely valuable for Verizon to earn revenues from advertising.
For people unfamiliar with the matter, Yahoo has been under pressure from shareholders for some time now, to sell its core business after the company failed to revive its business under the leadership of current CEO Merissa Mayer who took charge in 2012.
The activist fund, Starboard Value which holds 1.7 % of Yahoo stakes had demanded to replace the entire board due to the repeated failure of present leadership of Yahoo. The company had given a month deadline to submit preliminary bids for its core business assets in March.
During the recent first quarter earnings call, Mayer assured of “running a quality process designed to keep interested parties engaged” which included some of the “most well-known, respected names in the industry”.
On that note, the earnings call report was also not encouraging enough as despite exceeding the analysts’ expectations by a small margin, Yahoo saw a decline in its search and display advertising revenues by 11%. The total revenues on GAAP basis stood at $1.09bn narrowly beating the analyst estimate of $1.08bn.
Non-GAAP earnings of 8 cents per share also beat the forecast of 7 cents. However,on GAAP basis, the company lost 10 cents per share against a net income of 2 cents per share a year earlier.