Verizon Communications Inc., Quicken Loans Inc. founder Dan Gilbert, and Vector Capital Management are the three favorites to acquire Yahoo! Inc., according to people familiar with the matter.
All three submitted bids by Yahoo's Monday deadline, along with AT&T Inc. and private equity suitor TPG, said one of the people. After reviewing Monday's bids, Yahoo is expected to request best and final offers from two or three of the bidders, said another person familiar with the process.
In an earlier round, Gilbert, owner of the NBA champion Cleveland Cavaliers, and Vector Capital were among the top bidders for Yahoo's core Internet business, intellectual property, and real estate assets, one of the people said last month. All of that round's offers valued Yahoo at between $4 billion and $6 billion, except for Verizon's, a person familiar with the matter said at that time. Verizon's bid was lower -- $3.75 billion to $4 billion -- because it didn't include Yahoo's patents and real estate, the person said. Verizon may raise its bid at the final deadline to clinch a sale, two of the people said.
While some of the bidders may view Yahoo as a collection of assets that could be realigned or broken apart, Verizon sees a complementary set of businesses that could find a home alongside its AOL properties, making it a desirable suitor. According to people familiar with the phone giant's strategy, Verizon is confident it has a key asset to make the integration a success — AOL chief executive Tim Armstrong, who was a colleague of Yahoo chief executive Marissa Mayer's at Google.
One potential obstacle to picking a winning bid is that Yahoo may decide to sell its intellectual property separately, the people said. Yahoo has received offers for its patents, including one from a consortium of smaller companies that aggregate intellectual property for royalties, one of the people said. The patents will probably sell for less than $500 million, although they could be worth as much as $1 billion, that person said.
Yahoo showed investors a glimmer of success Monday as the sale process continues, posting second-quarter sales that exceeded analysts' estimates. Mayer said on a conference call that the company is "deep" into reviewing bids and will update shareholders at a prudent time.
Mayer, who joined Yahoo four years ago, has failed to spark a turnaround at the Sunnyvale, Calif.-based company, with sales showing little growth and adjusted earnings on the decline. The company is considering offers as it grapples with rising competition from younger rivals including Alphabet Inc.'s Google and Facebook Inc.
Yahoo's disappointing financial results have drawn the ire of investors, most notably activist Starboard Value LP. The company averted a proxy war in April when it agreed to place four new members on the board, including Starboard CEO Jeffrey Smith.