Yahoo Bids Look at Low End -- WSJ
May 20 2016 - 3:03AM
Dow Jones News
By Douglas MacMillan and Ryan Knutson
Verizon Communications Inc. and others are expected to bid
around $2 billion to $3 billion in the auction for Yahoo Inc.'s
core business, less than what the troubled Internet pioneer was
expected to fetch, according to people familiar with the
matter.
The telecom giant is considered the front-runner in a field that
includes private-equity buyers, some of whom are expected to bid in
the low end of that range, the people said. As recently as April,
people close to the process said Yahoo's core business would likely
go for between $4 billion and $8 billion.
Some offers could still be above the $2 billion-to-$3 billion
range, other people said, and it is generally in the interest of
bidders to play down their enthusiasm in an auction. It is also
possible that not everyone will bid for all of the core business
and that proposals will be structured differently.
Yahoo has set a deadline in the first week of June for the next
round of bids, some of the people said. It isn't clear whether that
will be the final round or if another one will follow, they
said.
Bidders have lowered their expected prices following weeks of
sale presentations by Yahoo Chief Executive Marissa Mayer at the
company's Sunnyvale, Calif., headquarters and its disclosure of
data that detailed the company's flagging prospects.
Other bidders in contention include buyout firm TPG and an
investor group that includes Bain Capital, Vista Equity Partners
and former Yahoo CEO Ross Levinsohn, people familiar with the
matter have said. Dan Gilbert, the Detroit investor and founder of
Quicken Loans, is also in the mix and may be backed by billionaire
investor Warren Buffett.
It is difficult to value Yahoo's core Web business in part
because such a large portion of the company's roughly $35 billion
market capitalization is based on its stakes in Alibaba Group
Holding Ltd. and Yahoo Japan. Youssef Squali, an analyst at Cantor
Fitzgerald, last month estimated the business is worth between $4
billion and $5 billion.
Yahoo last month issued a reminder of the difficulties it faces
when it said first-quarter revenue dropped 18% to $859.4 million,
excluding commissions paid to search partners. That is the first
time that figure has fallen below $1 billion since Ms. Mayer took
the reins nearly four years ago.
The segment of Yahoo's business that Ms. Mayer has designated as
its growth engine is slowing down dramatically. Revenue from
"mavens" -- a financial metric the company introduced last year to
track mobile, video, native and social ads -- rose 6.8% from the
prior year to $390 million. That compares with 26% in the fourth
quarter, 43% in the third period and 60% in the second quarter.
Potential buyers have in recent weeks had access to a "data
room" with nonpublic details about the company's financial
performance and prospects.
In meetings with potential suitors, Ms. Mayer has acknowledged
that the company is still in the middle of a turnaround, according
to one person who attended a meeting.
Should bids come in much lower than expected, Yahoo could
abandon the sale and proceed with her turnaround effort.
(END) Dow Jones Newswires
May 20, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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