The Company That Buys Yahoo May End Up Owing Mozilla More Than $1 Billion For Absolutely Nothing

By on July 16, 2016 in ArticlesHow Much Does

The world of inter-corporate finance can be a strange and terrifying one, especially if you forget to read the fine print. Take Yahoo – or, if you'd rather not pay Mozilla $375 million a year between now and 2019, don't. Now that Yahoo is seeking a buyer, a formerly obscure clause in a contract between Yahoo and Mozilla from 2014 may come into play, if Yahoo does indeed get sold. Here's an excerpt from the Recode story about the deal:

"According to the change-of-control term, 9.1 in the agreement, Mozilla has the right to leave the partnership if – under its sole discretion and in a certain time period – it did not deem the new partner acceptable. And if it did that, even if it struck another search deal, Yahoo is still obligated to pay out annual revenue guarantees of $375 million."

The deal between Yahoo and Mozilla was for Yahoo to become the default search engine in Mozilla's browsers, and it cost Yahoo $375 million last year. But it may end up costing them far more, since any potential buyer of the company will have to consider the consequences of their winning bid – if Mozilla doesn't want to continue the partnership, they can cash out to the tune of more than a billion dollars over the course of the next three years. And by the way, they're entitled by contract to this money even if they turn around and sign another equivalent contract with another search engine – like Google, for instance.

Mario Tama/Getty Images

Mario Tama/Getty Images

All in all, it seems like a pretty sweet deal for Mozilla, especially now that an agreement to buy Yahoo is reportedly likely to be reached by July 18th (of course, this development was not expected, back when the deal was first struck). Verizon and a few different private equity firms are reported to be among the interested parties – and hopefully for the winning bidder, they'll be found "acceptable" by the people at Mozilla.

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