After months of speculation, Verizon Communications, Inc. (NYSE: VZ – $55.89) has won the bidding to purchase Yahoo!’s internet business for $4.83 billion in cash. The deal includes Yahoo!’s search engine and advertising business, email service and all online content associated with its core platform. The Yahoo! business will be integrated with Verizon’s AOL unit that it purchased last year. The combined businesses will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities and online content. Combined, AOL and Yahoo! will have more than 25 brands in its portfolio for continued investment and growth. The deal, which includes approximately $1 billion in Yahoo! real estate, is subject to customary closing conditions, approval by Yahoo!’s shareholders and regulatory approvals and is expected to close in first quarter of next year.
While there are always risks with such acquisitions and integration, I believe that Verizon is on the right track to diversify from a telephone and TV/Internet services provider, and provide more online and mobile content for its subscribers. That said, I believe Verizon stock offers worthwhile capital appreciation potential over the coming 3 to 5 years. In addition, income-seeking types are likely to find VZ’s dividend yield of 4% rather appealing, as it is almost double that of the overall market.