“Verizon buys Yahoo for $4.8 billion.” What does that mean? LA Times story on July 26, 2016. Yahoo is a public company. What does that mean? It has more than 750 shareholders and more than a million in assets. Yahoo stock on July 26 was selling for $38.48 per share on the stock exchange. Is Verizon going to buy all billion shares outstanding? Below is a list of the major stockholders. Is Verizon going to send checks to every shareholder for its shares? What if someone doesn’t want to sell?
So I read the article carefully to try to figure out what really happened or is going to happen. But before getting to the specifics of this transaction, let’s think about the alternatives. Verizon could buy the assets of Yahoo or some of them. The decision to sell would be made by the Yahoo board. It would sign a bill of sale or something like that (lol). The check would be made out to Yahoo. The Yahoo corp would then have a whole lot of money and no business. The Yahoo corp would continue to exist and do what its board thinks is best. Yahoo could also sell its assets to Verizon for Verizon stock. It could sell the assets for part cash, part stock.
Or Verizon could buy the yahoo shares from the Yahoo shareholders. The board is out of the loop except probably to make a recommendation to the shareholders. Verizon could buy less than 100% of the shares. If it buys 50% of the outstanding shares, it would own enough stock (likely) to elect a majority of the board thereafter. Thus it would “control” Yahoo. But I actually don’t know how that works.
Here, the article talks about Verizon’s “$4.83-billion acquisition of Yahoo Inc.’s core business.” The first thing that jumps out at me about that is that Yahoo’s “market cap” today is some $35 billion. That is, all the shares outstanding times $38.48 market price today for one share. (Since I started writing this blog, the price has gone to $38.54.) I’m guessing $4.83 billion is a bargain basement price.
Next the article says “The sale does not include Yahoo’s cash or its shares in Alibaba Group and Yahoo Japan. After the deal closes, these assets will become a publicly traded investment company with a new name.” So it is the sale of some (presumably most) of the assets of Yahoo but not all. The Yahoo board will change the name of Yahoo after the transaction or transfer its assets to a new entity I guess.
By the way, CEO Marissa Mayer will receive a bonus of $55 million from Yahoo if she decides to leave Yahoo.
Last note: A sale of assets is complicated by liens. If Yahoo has loans secured by the assets, the assets cannot be sold without either payment to the lender of the loan or some sort of assumption of the debt by the buyer (and presumably release by the lender of Yahoo’s obligation to sell the debt).
One more last note: After I wrote this I found a post on Professor Steve Bainbridge’s blog about the sale. The post is titled “The complexities of the Yahoo deal.” It in turn cites an article in the New York Times about the transaction entitled
Yahoo’s Sale to Verizon Leaves Shareholders With Little Say
. Apparently Yahoo is selling the stock of one of its subsidiaries. Since it is not a sale of most of the assets, no shareholder approval is required. And since Yahoo owns 100% of the shares, the transfer to Verizon at least is simple. But what is owned by the subsidiary? Assets are being transferred to the subsidiary and some assets are being transferred out. Notable is this comment:
Because it is a sale of a subsidiary, the $4.8 billion will be paid to Yahoo. Its shareholders will not receive any money unless Yahoo pays it out in a dividend (after paying taxes). Instead, Yahoo shareholders will be left holding shares in the renamed company.
Currency in USD.
|7.87%||Shares Held by All Insider and 5% Owners|
|70.60%||% of Shares Held by Institutional & Mutual Fund Owners|
|76.63%||% of Float Held by Institutional & Mutual Fund Owners|
|792||Number of Institutions Holding Shares|
Direct Holders (Forms 3 and 4)
|SMITH JEFFREY C||7,771||Jun 30, 2016|
|MAYER MARISSA A||2,331,917||Jul 7, 2016|
|GOLDMAN KENNETH A||637,054||Jul 7, 2016|
|BELL RONALD S.||636,865||Jul 7, 2016|
|UTZSCHNEIDER LISA||619,000||Jul 18, 2016|
|SCHWAB CHARLES R||7,831||Dec 31, 2015|
|KOTHARI AMAN S||140,221||Sep 6, 2015|
|WEBB MAYNARD G JR||14,409||Jun 30, 2016|
|JAMES SUSAN M.||55,272||Jun 24, 2015|
Top Institutional Holders
|Holder||Shares||Date Reported||% Out||Value|
|Vanguard Group, Inc. (The)||52,172,257||Mar 30, 2016||5.49%||1,920,460,832|
|State Street Corporation||36,235,550||Mar 30, 2016||3.81%||1,333,830,631|
|Goldman Sachs Group, Inc.||31,103,046||Mar 30, 2016||3.27%||1,144,903,154|
|FMR, LLC||26,052,253||Mar 30, 2016||2.74%||958,983,458|
|BlackRock Institutional Trust Company, N.A.||23,085,504||Mar 30, 2016||2.43%||849,777,425|
|Shaw D.E. & Co., Inc.||19,039,209||Mar 30, 2016||2.00%||700,833,302|
|Owl Creek Asset Management, L.P.||15,051,092||Mar 30, 2016||1.58%||554,030,711|
|Public Sector Pension Investment Board||14,547,200||Mar 30, 2016||1.53%||535,482,446|
|TCI Fund Management Ltd||14,403,985||Mar 30, 2016||1.52%||530,210,702|
|Natixis||14,099,072||Mar 30, 2016||1.48%||518,986,854|
Top Mutual Fund Holders
|Holder||Shares||Date Reported||% Out||Value|
|Vanguard Total Stock Market Index Fund||16,339,947||Mar 30, 2016||1.72%||601,473,465|
|Vanguard 500 Index Fund||10,985,269||Mar 30, 2016||1.16%||404,367,762|
|Vanguard Institutional Index Fund-Institutional Index Fund||9,629,049||Mar 30, 2016||1.01%||354,445,303|
|SPDR S&P 500 ETF Trust||8,849,588||Apr 29, 2016||0.93%||323,894,903|
|Powershares Exhg Traded Fd Tr-Powershares QQQ Tr, Series 1||6,867,023||Apr 29, 2016||0.72%||251,333,028|
|Vanguard Growth Index Fund||4,780,955||Mar 30, 2016||0.50%||175,986,958|
|Merger Fund, The||4,645,563||Mar 30, 2016||0.49%||171,003,178|
|Spartan 500 Index Fund||4,511,366||Apr 29, 2016||0.47%||165,115,986|
|Price (T.Rowe) Science & Technology Fund||4,117,900||Mar 30, 2016||0.43%||151,579,903|
|College Retirement Equities Fund-Stock Account||3,719,534||Mar 30, 2016||0.39%||136,916,050|