The great Yahoo mystery: Who is investing and for how much?

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By Charman-Anderson /  01 Dec 2011 , 18:38

Tech giant Yahoo is considering two bids on a minority investment of 20 percent, one from a consortium let by Silver Lake offering about $16.60 per share and one from TPG Capital offering about a dollar more, according to Bloomberg. Other rumored bids, from Alibaba Group in Japan and Softbank in China value Yahoo at $20 per share, an offer that might be more attractive to shareholders if it firms up.

But Alibaba has yet to confirm that it is committed to the bid. Alibaba Group spokesman, John Spelich, said:

“Alibaba Group has not made a decision to be part of a whole company bid for Yahoo.”

This is despite very clear messages over recent months from Alibaba founder and CEO Jack Ma that he was willing to do whatever it took to buy back the shares in his company that Yahoo currently owns. Wrote The Guardian:

“Alibaba definitely wants to get its stake back from Yahoo, so whatever that can make that happen, they will try for it,” said Hong Kong-based JPMorgan analyst Dick Wei, adding that Alibaba may finance the deal by taking on more debt or finding a strategic buyer.

Reuters

Yahoo’s directors are leaning towards one of the minority investments deals, reports the New York Times, rather than selling the entire company. Although it reports that such a decision could “alienate shareholders and leave the troubled Web pioneer vulnerable to potential takeover bids.”

But AllThingsD’s Kara Swisher thinks that the Alibaba bid is a “phantom”, saying that the $20 bid isn’t real:

[I]t’s not even close, when you actually check with two of the key members of the group of alleged buyers, which would apparently be Blackstone, Bain Capital and Yahoo’s Asian partners, Alibaba Group and SoftBank.

Sources close to Blackstone and Alibaba said while there have been talks, which have been previously reported weeks ago here and elsewhere, there is no bid in the offing that is close to fruition and at that price.

Swisher believes that the rumours of a bigger deal are “being spread around by hopelessly cynical Wall Street types interested only in stock manipulation” in order to bump the price of Yahoo stock. If that’s the case, it has worked -Bloomberg reports that Yahoo shares “advanced 6.9 percent to $16.79 in extended trading”.

The situation is further complicated by interest from Thomas H Lee Partners, a private equity firm, in buying Yahoo’s US operations, according to The Guardian. They also report interest from Providence Equity Partners and Hellman & Friedman.

Whether any of these deals can come to fruition will depend on the ability of those within Yahoo to build consensus. Co-founder Jerry Yang has been reported as researching a deal with private equity firms which would allow him to take the company private. That would secure his position, but has not pleased investors.

The New York Times reports that Daniel S. Loeb, whose hedge fund owns about 5 percent of Yahoo, has demanded that Yang step down. Loeb also demanded two board seats and said that the existing board was unable or unwilling to “properly solicit true strategic alternative bids”. Said Loeb:

“We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so.”

In response, Yahoo defended the board and Yang:

“Mr. Yang is one of nine directors with the exact same fiduciary duties and motivation as all of his fellow directors – to serve the best interests of all the company’s shareholders. The board and the transactions and strategic planning committee initiate, direct and oversee any work Mr. Yang undertakes in relation to the strategic review process.”

Yahoo seems able to attract chaos without even trying. It is still searching for a CEO after firing Carol Bartz, a split that turned acrimonious, and is still undergoing a strategic review. Whether Yahoo can pull a rabbit out of the hat this time round depends very much on whether it can find the hat.


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