Sunday 08 / September / 2024
New York: Verizon Communications plans to make a first-round bid for Yahoo’s Web business next week, and is willing to acquire the company’s Yahoo Japan stake to help sweeten the offer, according to people familiar with the matter.
Google, the main division of Alphabet, is also considering bidding for Yahoo’s core business, a separate person said.
Potential suitors AT&T and Comcast have decided against bidding, some of the people said, asking not to be identified as the discussions aren’t public. Microsoft, which failed with a hostile bid for Yahoo in 2008, won’t bid this time, another person said.
Time is still evaluating a bid, while private equity funds Bain and TPG — among others — are also planning to make a run at the business, either alone or by backing a strategic acquirer, the people said. While the buyout firms haven’t yet paired themselves with a strategic buyer, they are open to the idea of doing so, the people said.
First-round bids for the company’s main Web assets are due April 11, a person with knowledge of the matter said last week. Shares of Yahoo Japan jumped 6.4 per cent in Tokyo, the biggest gain in almost three months. Yahoo shares fell 1.3 per cent to $36.17 in New York on Thursday.
Three banks
Verizon and its subsidiary AOL is working with at least three financial advisers on the Yahoo bid, said three of the people. Hiring so many banks is a sign that Verizon is serious about its takeover plans — it has said since late last year that it was interested in buying some or all of Yahoo.
Verizon, which has a market value of about $213 billion, could give the Yahoo Japan stake to its shareholders or sell it, one of the people said.
Sunnyvale, California-based Yahoo would prefer to sell its 35.5 per cent stake in Yahoo Japan, worth about $8.5 billion, along with the core business, Bloomberg reported last month. The valuation of the combined assets would make it more difficult for private equity firms to finance a bid for both parts.
Representatives for Yahoo, AT&T, Comcast, Time, TPG and Verizon declined to comment. Representatives for Bain and Google didn’t immediately respond to requests for comment.
Revenue drop
Based on the financial information that it’s seen, Verizon values Yahoo’s core business at less than $8 billion, one of the people said. Verizon, as well as some private equity firms, met with Microsoft last month to talk about potential funding for a bid, people familiar with the matter said at the time.
Microsoft hasn’t committed any funding and is unlikely to provide anything more than a token investment to the winning bidder, one of the people said. A spokesman for Microsoft declined to comment.
Yahoo’s projected revenue will drop almost 15 per cent and earnings by more than 20 percent for 2016, according to a slide deck it released to potential bidders, Re/code reported on Wednesday. Verizon would replace Yahoo Chief Executive Officer Marissa Mayer with AOL chief executive officer Tim Armstrong and Marni Walden, Verizon’s executive vice president, who would run a combined Yahoo and AOL, two of the people said.
Still on deck
Japan’s SoftBank has always had tepid interest in buying Yahoo, two of the people said. So far, discussions have centered around Yahoo Japan, in which SoftBank is the majority shareholder, paying a reduced licensing fee to Yahoo.
The two sides are in active discussions to lower this fee, which stands at three percent of gross revenue, before any deal to sell Yahoo is announced. Yahoo Japan has argued the fee is too high because Yahoo hasn’t invested in technology the Asian company can use, causing the brand to suffer, one of the people said. A representative of SoftBank declined to comment.
Yahoo’s alternatives
Yahoo said it would explore strategic alternatives, including selling its main Internet operations, earlier this year after scrapping a long-time plan to spin off its valuable Asian assets. The company’s stock has declined about 20 per cent in the past 12 months as turnaround efforts led by CEO Mayer stalled and sales have sagged, leaving the company vulnerable to activist investors.
Last month, chief financial officer Ken Goldman said the board committee working on a possible sale of the core operations is "more active than anyone can possibly believe.” Activist Starboard Value, a longtime Yahoo critic, said in March it was fed up with the Web portal’s leadership and called for the board to be completely replaced.
The activist fund, which recently increased its Yahoo holdings to 1.7 per cent, said the board has failed to deliver results. The current board can’t be trusted to weigh the options that will best serve investors, and it’s important for the activist to be involved to ensure a "full and fair sale process,” according to a letter from Starboard chief executive officer Jeffrey Smith. Smith has put his own name in as one of the hedge fund’s director nominees to the board.
