$25 Billion Required to Buy Yahoo: Any Takers?

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Two-thousand and eleven has been a year full of major acquisitions in the technology sector. Next on the chopping block could be Yahoo, as media reports speculate the company appears to be in the process of dismantling itself, claiming there is a high amount of private-equity interest in the deal.

But a buyout of the struggling Internet company won’t happen any time soon.

Barron’s recently summarized how a potential leveraged-buyout (LBO) transaction could be structured “given the high amount of private-equity interest and speculation around Alibaba Group and Yahoo shares.”

“The bottom line is that we do not see a near-term transaction given the complexities, but recent transactions validate the underlying value in Alibaba Group [of China],” Barron’s reported, noting that Yahoo appears to be in the process of dismantling itself, maybe into pieces for sale.

Barron’s asserted that Yahoo could be “an attractive candidate” for an LBO transaction.

“We think a takeout could potentially fetch a bid for $19 per share (29 percent premium) for Yahoo, which would require about $25 billion in total capital,” the report said, noting, however, the complexities in a potential transaction based on the firm’s Asian assets and the multiple parties involved mean that “a near-term event is unlikely.”

Last week, Yahoo issued a letter to employees, signaling what could be the beginning of the end.

The company’s co-founders and chairman said in a letter to employees on Friday, “Our advisers are working with us to develop ideas that we will pursue proactively,” the International Business Times reported. “We will take the time we need to select and structure the best approach,” the trio said in an internal memo.

The management team – now led by Yahoo CFO Tim Morse – also told staff it’s received “inquiries from multiple parties” interested “in a number of potential options.”

TechZone360 recently reported the struggling Internet company was contacted by potential buyers interested in acquiring “some or all” of the Sunnyvale, Calif. company. One interested bidder is private equity firm Silver Lake, which has called Yahoo board members on a possible deal, the report said, but hasn’t met with the firm.

Earlier this month, former Yahoo Chief Executive Carol Bartz was ousted by the company’s board, bringing an abrupt but not surprising end to a rocky tenure at the struggling Internet search company.



Erin Harrison is Executive Editor, Strategic Initiatives, for TMC, where she oversees the company's strategic editorial initiatives, including the launch of several new print and online initiatives. She plays an active role in the print publications and TechZone360, covering IP communications, information technology and other related topics. To read more of Erin's articles, please visit her columnist page.

Edited by Jennifer Russell
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Executive Editor, Strategic Initiatives

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