Is Yahoo! Verizon The Worst Merger Ever?

Sometimes mergers go great. Peanut butter and jelly. Brooks and Dunn. Italian beef and provolone. Other times it’s a complete train wreck. Looks like Marissa Mayer finally found a big enough sucker, I mean suitor, to buy Yahoo (NASDAQ:YHOO). Verizon (VZ) looks to be a buyer for about $5 billion. The deal would include Yahoo’s core internet business and real estate assets. The non-core sale of intellectual property assets will be sold separately.

The deal puts together two of the biggest companies of the 20^th century, AOL and Yahoo. If this were before Y2K, the AOL chat rooms would be going crazy right now. Then again, you’d be waiting an hour for your dial-up to download this video. It’s so cheap, it can’t be a bad deal for Verizon, right?

Ehhh. EBay (EBAY) paid $2.6 billion for Skype in 2005 then sold it four years later for $1.9 billion. Still scratching my head. Online auctions and video chats? There’s a reason why Sotheby’s (BID) never bought AT&T (NYSE:T). Going once, twice, sold! But maybe the AOL side of this sweetens up the deal.

Then again, remember AOL Time Warner? Even the guys running the show over there knew they screwed up. $160 billion to create the world’s largest media company. Jerry Levin, who sold Time Warner to AOL was quoted as saying, “I presided over the worst deal of the century apparently.” Not mad at you Jerry, you still got paid. Here with Yahoo, there are some synergies.

There were also synergies when Sprint (S) and Nextel merged agreed to merge as a $36 billion deal in 2005. Shortly thereafter, people realized that walkie talkies are for fifth graders and summer camp slasher movies. Instead of buying Nextels, people made sure their next telephones were smart phones. Sprint shut down Nextel’s network in 2013.

Then there’s Daimler Benz and Chrysler. Let’s take the precision and quality of one of the most sought after car companies in the world and mix it with cheaply made, poorly designed, hot garbage. Talk about culture clash. Mercedes got worse and eventually paid $650 million for Cerberus to take Chrysler, which eventually made its way over to Fiat. Much better match.

Where this ranks in deal making history remains to be seen. I can tell you that Yahoo is a Zacks Rank #5 (Strong Sell) right now with Value and Growth Style Scores of F. Last quarter the company reported a 5 cent loss, 7 cents worse than the 2 cents of earnings analysts were looking for. So if you waited Verizon, you’d probably get it even cheaper.