Yahoo's Wagons Circled Again;
Could Microsoft Bite The Bullet?
- December 1, 2011
A battalion of private equity groups have emerged this week to ponder the acquisition of the oft-desired - but never married - Yahoo. Again. The saga began with Microsoft's firm interest in February 2008, but talks faded into a co-op deal with the two firms sharing their search advertising.
What I find hard to understand is why Microsoft, in all these years, has not straight-armed other poker-players by moving its chips "all-in." It may be happy just having a joint-advertising venture with Yahoo, but for $26 bil.--less than half of its $56 bil. cash stash, it could own outright the best news, sports & finance site on the world internet stage. That would be $15 bil. less than its 2008 offer. Such a deal. Or, it could partner with private equity and keep more of its cash on hand.
This is, beyond the shadow of any doubt, the most bizarre story in media private valuation that I have ever had the misfortune to analyze. Corporations are supposed to seek the highest price their business can support. But Yahoo has made every effort to hold down its value while it attempts to structure not a sale, but a management buoyout.
The new talks are still hovering around valuing Yahoo in the mid-to-high 'teens, where it traded in 2008, when Microsoft made the first of several escalating bids. The Seattle computer giant offered $31 and gave up when Yahoo reportedly nixed a $33-34 bid. After that, the stock collapsed to as low as $8.94 in Nov. 2008.
The buzz now centers on yesterday's Bloomberg report that Yahoo's Asian partners (Alibaba in China and Softbank in Japan) are working with U.S. private equity players Blackstone & Bain Capital to acquire Yahoo. You may recall, if you have had the patience to follow this living legend, that hedge fund Third Point (Daniel Loeb) kicked off this latest chapter of the Longest Acquisition Ever Made with a Sept. 8 challenge made in public. At Sept. 30, Third Point reported holding 48 mil. Yahoo shares, almost 4% of Yahoo's capitalization and its largest single position at 30% of a $2.1 bil. portfolio, according to Bloomberg. Its holdings increased to 56 mil. shares (5.25%) by Nov. 4.
The phones were hot over this deal yesterday, when Kara Swisher of the All Things D website learned that the Asian partners were "not close to a deal" nor that a $20 pricetag is realistic. (My own estimate in this price-is-right game is at least $21, assuming true competitive bidding.) Kara also learned that Ali Baba may be working with Providence Equity, yet another of the private equity leaders. Furthermore, an Ali Baba spokesman said his company had not made a decision "to be part of a whole-company bid for Yahoo." That's back to square one!
As I write this, with 2 hours to go before market close, Yahoo shares are at $16.29, + 58 cents on 33 mil.-share volume. Average daily volume has been 24.5 mil. shares. I bought more shares today at $16.21. I continue to wait for a fair deal for stockholders, along with Capital Research, Invesco, Vanguard, State Street, Blackrock, Janus, Northern Trust, Deutsche Bank and hundreds of other patient, but frustrated investors longing to see the fair-market value this institution deserves.
