Verizon Communications on Monday announced plans to acquire Yahoo for $4.8 billion in cash, ending months of uncertainty after Marissa Mayer's battered internet giant company said it would review strategic alternatives.
Share prices of both companies initially moved slightly higher in premarket trading after the announcement, but they turned lower. By early afternoon, Yahoo was down 2.7 percent. (For the latest prices, click here for Yahoo and here for Verizon.)
Marni Walden, Verizon president of product innovation and new businesses, said on CNBC's "Squawk Box" that the deal included Yahoo's core operating business and patents.
The acquisition will help the telecom company in its efforts to build a media company, she said.
"Yahoo gives us scale and that's what's most critical here. We go from being in the millions of audience to the billions. We want to compete and that's the place that we need to be, so we're very pleased with where we are today," Walden said.
The transaction is seen boosting Verizon's AOL internet business, which the company acquired last year for $4.4 billion, by giving it access to Yahoo's advertising technology tools, as well as other assets such as search, mail, messenger and real estate.
Some analysts have placed synergies at roughly $1 billion, but AOL CEO Tim Armstrong said that was not the main focus of the Yahoo deal.
"The strategy behind the deal is to really go after mobile and video and a lot of the global services — the services that AOL has and Yahoo has — at scale," he told "Squawk Box."
Facebook and Google dominate the U.S. digital advertising markets. Microsoft, Yahoo and AOL lag far behind and have lost market share.
Together, AOL and Yahoo would have about 5 percent of the digital ad market. But on Monday, Walden said she expects AOL and Yahoo to break out of their combined single-digit market share.
"We're going to get to double digits," she said.
In a statement, Verizon said it expects the deal to close in the first quarter of 2017, subject to approval of Yahoo shareholders and regulators.
The deal would mark the end of Yahoo as an operating company, leaving it only as the owner of a 35.5 percent stake in Yahoo Japan, as well as its 15 percent interest in Chinese e-commerce company Alibaba. Yahoo will also retain its cash, convertible notes, certain minority investments, and a noncore portfolio of patents called Excalibur.
The Excalibur portfolio includes some of Yahoo's oldest patents related to paid search, search optimization and advertising, according to MCAM, which conducts analysis and valuation of intangible property.
"While there is some advertising IP in the portfolio that Verizon is buying, they are mostly getting social networking, mobile, fantasy sports, and some messaging and email," MCAM said in a statement.
In the press release, Mayer said, "The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social."
In an interview on CNBC, Mayer signaled that she would be open to staying with the company even though no decision has been made on her future following its acquisition by Verizon.
Walden said Verizon had not yet made a decision about what role if any Mayer would have after the deal closes. Armstrong will lead the integration, she added.
In December, Yahoo scrapped plans to spin off its Alibaba stake after investors worried about whether that transaction could have been carried out on a tax-free basis. It instead decided to explore a sale of its core assets, spurred on by activist hedge fund Starboard Value.
Five bidders submitted offers in the final round, CNBC reported last week.
Also last week, Yahoo reported quarterly earnings that slightly missed analysts' expectations, and revenue that beat projections — in part due to what Mayer called "disciplined expense management."
— CNBC's Anita Balakrishnan and Reuters contributed to this story.
Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.