Yahoo to weigh bids from Verizon, TPG, YP as first round closes

Verizon Communications will vie with at least one other company and a private equity firm in the bidding for Yahoo Inc., according to people familiar with the matter.

The Internet portal received offers from suitors including telecommunications provider Verizon, private equity firm TPG and YP Holdings LLC, the digital-advertising business of what was formerly called Yellowpages.com, said the people, who asked not to be identified because the process is private. Yahoo had set Monday as the deadline for initial bids as it winnows down which companies are in the running to acquire its Web operations.

For Verizon, Yahoo represents a strategic investment. The company would probably combine the online businesses with AOL, which Verizon acquired last year. Private equity buyers often seek ways to cut costs and improve operations at targets before selling them off or combining them with other assets down the road.

Yahoo -- the main on-ramp for millions of people

exploring the Internet for the first time in the 1990s -- has failed to keep up with audience and advertising changes that have led to the rise of Facebook Inc., Twitter Inc. and Google. The company's decision to consider offers for its core business follows years of failed turnaround attempts by Chief Executive Officer Marissa Mayer, who took over in 2012. In recent months, strategy shifts have brought increased investor criticism, including a move by activist Starboard Value LP to replace the entire Yahoo board.

Rebecca Neufeld, a spokeswoman for Yahoo, declined to comment, as did Bob Varettoni, a spokesman for Verizon. Representatives of TPG and YP declined to comment.

Yahoo had extended the deadline for first-round bids by a week, a person with knowledge of the matter said this month.

Also this month, people familiar with the matter said potential suitors AT&T Inc. and Comcast Corp. had decided against bidding. Microsoft Corp., which failed with a hostile bid for Yahoo in 2008, won't bid this time, another person has said.

The Sunnyvale, Calif.-based company is projected to post lower first-quarter revenue and profit when it reports earnings Tuesday after U.S. markets close. Yahoo's last earnings release, in February, disappointed investors, with the company saying it would cut staff and shutter some businesses. The stock has declined 18 percent in the past year.

Yahoo said it would explore strategic alternatives, including selling its main Internet operations, earlier this year after scrapping a longtime plan to spin off its valuable Asian assets because of the potential tax implications for shareholders. Last month, Chief Financial Officer Ken Goldman said the board committee working on a possible sale of the core operations is "more active than anyone can possibly believe."

Still, Starboard Value, a longtime Yahoo critic, in March said it was fed up with the Web portal's leadership and called for the board to be replaced. The activist fund, which recently increased its Yahoo holdings to 1.7 percent, said the board has failed to deliver results and can't be trusted to weigh the options that will best serve investors.

Starboard said it was seeking to be involved to ensure a "full and fair sale process," according to a letter from CEO Jeffrey Smith. Smith has put his own name up as a nominee to the board.

Verizon and its subsidiary AOL had been working with at least three financial advisers on the Yahoo bid, people with knowledge of the matter said earlier this month. Hiring so many banks was a sign that Verizon is serious about its takeover plans -- it has said since late last year that it was interested in buying some or all of Yahoo.

Verizon is looking to make its go90 streaming video service a source of new sales and profit, and Yahoo -- with more than 1 billion people using its e-mail, finance, sports and video sites -- represents a prized asset to combine with AOL's 2 million users and Verizon's more than 112 million wireless subscribers. That kind of Web traffic, along with exclusive content, would help Verizon secure a foothold in video advertising against Google's YouTube and Facebook to serve a mobile phone-addicted generation.

YP, one of the biggest U.S. digital advertising companies, is working with Goldman Sachs Group Inc. to investigate a variety of strategic alternatives, which could include acquiring smaller firms or selling itself, said the people, who asked not to be identified because the negotiations are private.

The company, controlled by Cerberus Capital Management, is valued at $1 billion to $1.5 billion, one of the people said. Its size makes it a candidate for a Reverse Morris Trust with Yahoo: a tax-free transaction in which YP would merge with a spun-off subsidiary of Yahoo's core business.

This story was originally published April 19, 2016 at 8:15 PM with the headline "Yahoo to weigh bids from Verizon, TPG, YP as first round closes ."