Yahoo Once Sought After, Now in A Tight Spot
DealBook reports that the future of Yahoo (NASDAQ:YHOO) holds limited options. While once sought after by Microsoft (NASDAQ:MSFT) in 2008 when shares were selling at $31, the company is now trading just shy of $16. The company says they aren’t looking for an outright buyer, but some suspect that is because they don’t want to admit their mistake of refusing Microsoft’s previous offer.
The lackluster sales price may not be the only reason Yahoo isn’t for sale. DealBook also reports that Yahoo’s most valuable assets are its shares of Alibaba, a Chinese Internet company, and Yahoo Japan. Yahoo has a previous agreement with Alibaba shareholders that may give them the right to repurchase the Alibaba shares in the event of the sale of Yahoo. This would mean the purchaser of Yahoo would be missing out on a key aspect of the company, leading to a further diminished sales price.
DealBook’s Steven Davidoff also cites Yahoo’s (NASDAQ:YHOO) current relationship with Microsoft as a possible hang-up. Davidoff writes, “Yahoo’s outsourcing of its search engine functions to Microsoft also makes it hard for anyone other than Microsoft to take full advantage of Yahoo’s technology.”
So what option does Yahoo have left if not to sell? The company is currently taking bids for minority investors. Sources say that there are two consortiums currently bidding for a minority share — Microsoft, Silver Lake, and Andreessen Horowitz being one and TPG Capital being the other. It will be a costly move for Yahoo to take on minority investors who will likely require Yahoo to borrow big bucks to give its shareholders a payout, but the company will also gain a management team.