Verizon (VZ) & AT&T (T) Submit Third-Round Bids For Yahoo

According to a report by Bloomberg, the struggling web-portal operator Yahoo! Inc. (NASDAQ:YHOO) received five bids for the final round of bidding for its core assets.

Notable among the bidders are U.S. telecom behemoths Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) . The other three bidders are a consortium led by Quicken Loans Inc. founder Dan Gilbert and backed by Berkshire Hathaway Inc. (NYSE:BRKa) Chairman Warren Buffett, a partnership of Vector Capital Management and Sycamore Partners and private equity firm TPG Capital LP.

Citing an unnamed source, Bloomberg stated that out of the five, Verizon, Quicken Loans and Vector Capital Management are likely to be the top bidders. The deadline for submitting the final round of bids was this Monday. Yahoo is expected to declare the winning bidder next week after examining all three bids.

Internet-based information service provider giant Yahoo is currently struggling with its core businesses namely mail service, online sports, financial and general news sections and its vital online advertising technology, which includes the video advertising platform, BrightRoll.

In Feb 2016, Yahoo disclosed that it would consider "strategic alternatives" for its core businesses, including an outright sale or a spin-off. Notably, Yahoo boasts a significant user base that trails only Google of Alphabet Inc. (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB) .

Yahoo was initially expecting to collect around $6 billion from the sale of its core Internet-based products. The company was also expecting to collect $0.5 billion to $1 billion from the sale of its non-core assets which consist of its 3,000 patents and real estate properties.

As per Bloomberg, Verizon’s second bid was in the range of $3.75 billion to $4 billion for the core assets of Yahoo while AT&T’s bid was around $5 billion which include both core and non-core assets. Both bid sizes were much less than what were initially anticipated by Yahoo. The reason may be the dwindling business of Yahoo. According to the research firm eMarketer Inc., this year Yahoo will control just 1.5% of the overall digital advertising market, down from 2.1% in 2015.

Bottom Line

Yahoo has not even been able to maintain its sales and profits, let alone grow. This is very disconcerting for a company that has been trying to turn itself around for many years now. Thus, any buyer putting high stakes on the bidding table will be great news for shareholders. On the other hand, Yahoo employees stand to benefit if either of the telecom giants vertically integrates Yahoo’s assets more profitably. Only time will unravel what is in the cards for this once leading Internet giant.