There's Talk of Taking Yahoo Private

by: Eric Savitz December 02, 2008 | about stocks: MSFT / TWX / YHOO    

Eric Savitz

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Well, here’s a new twist to the Yahoo (YHOO) saga.

According to the Wall Street Journal, former AOL chief Jonathan Miller is trying to raise money to buy all or part of the company. The story is sourced to “people familiar with the matter.”

The story says Miller has been talking to private equity investors and sovereign wealth funds for months trying to come up the money for a Yahoo deal. Miller reportedly thinks he can do a deal worth $20 to $22 a share to Yahoo holders, which would mean raising $28 billion to $30 billion. The story says it is unclear if Microsoft (MSFT) would be involved with such a transaction. But the story also said that sources close to Yahoo “expressed deep skepticism” that Miller could come up with that much cash. Miller has reportedly talked to some Yahoo board members about the concept, the WSJ says, but the matter has not been officially discussed by the board.

I think you have to side with the skeptics here; in the current environment, the prospect of raising $30 billion seems almost impossible - particularly for a company which is losing market share in a rapidly weakening online advertising market.

The Journal adds that “other investors and private equity firms continue to mull potential moves for Yahoo” without Miller’s involvement, again citing “people familiar with the discussions.” Those “people” caution that it is far from clear whether any deal can get done.

The WSJ story notes as well that there has been progress in Yahoo’s talks with Time Warner (TWX) about its AOL unit, but that no deal is imminent.

The WSJ writes that Miller, who now runs the venture capital fund Velocity Interactive Group with partner Ross Levinsohn, a former exec at News Corp.’s Fox Interactive unit, has been a behind-the-scenes player in discussions between Yahoo and Microsoft.

Over the weekend, The Times of London reported that Microsoft was in talks on a complicated deal in which it would manage Yahoo search and get an option to buy the business, with Miller and Levinsohn taking the management reins at Yahoo from outgoing CEO Jerry Yang. But Levinsohn told AllThingsD that the Times story was “total fiction.”

Well, clearly people are trying to make something happen here, but at the end of the day, it is hard to imagine how a deal could go forward without some involvement from Microsoft, which has the cash to propel it forward and the strategic interest in gaining control of Yahoo’s search business. Maybe Miller intends to finance his grand scheme in part by selling search to Microsoft, which would be comparable to plan laid out in the Times. The plan Miller’s partner Levinsohn said was total fiction. Maybe it was only partial fiction. My head hurts.

YHOO Tuesday is up 90 cents, or 8.4%, to $11.64.

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This article has 1 comment:

  •  
    Dec 02 11:59 PM
    E, you are the only writer on the Internet that has consistently hit the nail on the head re. Yahoo, especially with this posting. The deal mentioned by the UK Times on Sunday is essentially the same as what was announced by the WSJ today. Same players, same total dollar amount. Combine both these stories with Icahn's recent investment, MSFT's hiring of YHOO's top search execs, the 10mm shares snatched up immediately upon today's announcement, the "decline to comment" responses, etc., and the picture starts to come into focus. The level of "chatter" sure seems to signal an imminent deal, which will likely be close to what was reported Sunday.

    Great job. It's a pleasure to read your posts.
    Reply | Link to Comment
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