Verizon buys Yahoo for $4.8 billion

“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.


Major Holders

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)
Name Shares Date Reported
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

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