Yahoo Board to Weigh Potential Sale of Internet Business -- 2nd Update
December 01 2015 - 9:21PM
Dow Jones News
By Rick Carew, Douglas MacMillan and David Benoit
Yahoo Inc.'s board is planning a series of meetings this week to
consider selling off the company's flagging Internet businesses and
how to make the most of its valuable stake in Chinese e-commerce
powerhouse Alibaba Holding Group Ltd.
The board is expected to discuss its options in sessions
beginning Wednesday and continuing through Friday, according to
people familiar with the plans.
Directors are likely to discuss whether to proceed with a plan
to spin off its investment in Alibaba, currently worth more than
$30 billion, find a buyer for Yahoo's gaggle of Web properties, or
both, the people said.
In a sign that change may be afoot at the company, a Yahoo
executive recently canceled an appearance at a Credit Suisse
investment conference that was planned for Tuesday.
Private equity firms are expected to be among those taking a
look at Yahoo's core business, people familiar with the matter
said.
Growing concerns around Chief Executive Marissa Mayer's lack of
progress turning around Yahoo and an exodus of top executives have
increased pressure on the company's board to consider her future
and alternatives to her turnaround attempt, now in its fourth
year.
Activist investor Starboard Value LP last month called on the
company to halt its Alibaba spinoff and instead find a buyer for
its Internet business. In a letter to Yahoo, Starboard said its
position changed following the federal government's decision not to
rule on whether the Alibaba spinoff would incur billions of dollars
in taxes.
Much of the value of Yahoo's $31 billion market capitalization
is tied up in two large Asian assets, Alibaba and Yahoo Japan.
Its 15% stake in Alibaba is now worth about $32 billion, and its
35% stake in Yahoo Japan is now worth about $8.5 billion. Yahoo's
cash and short-term investments totaled $5.9 billion at the end of
the third quarter.
That would mean investors are valuing Yahoo's core business at
less than zero if the Asian assets were spun out tax-free. In a
research report in October, Cantor Fitzgerald analyst Youssef
Squali valued Yahoo's core business at $3.9 billion, not including
cash.
Any buyer would have to contend with the complication
surrounding the Alibaba stake. Yahoo failed to get prior approval
of its plan from the Internal Revenue Service, raising the risk
that the agency could later challenge the spinoff's tax-free
status.
Finding a buyer for part or all of Yahoo's business could reduce
or eliminate that risk, provided the buyer comes up with a plan for
what to do with the Asian assets.
There is no guarantee any new deal for part or all of Yahoo will
materialize. The company has considered big merger deals in the
past, mostly notably several years ago with Microsoft Corp., that
it failed to strike.
Yahoo's core business is shrinking, but it still represents some
of the most visited services on the Web. Its properties, including
Yahoo Mail and Yahoo News, are collectively the third-most visited
Internet sites in the U.S., with 210 million visitors in October,
according to comScore. Yahoo only lags Google Inc. and Facebook
Inc.
Under Ms. Mayer, Yahoo has made investments in online video,
advertising technology and mobile software that have failed to
create meaningful traction for the company.
Ms. Mayer said in October she would adopt a new strategy to
"reset" the company's focus, without providing details. The CEO has
hired management consultant McKinsey & Co. to look for areas of
the company to cut, said a person familiar with the matter.
Yahoo is no stranger to takeover speculation. In 2008, activist
shareholder Carl Icahn took a more than 5% stake in Yahoo, gained
board seats and pushed it to sell to Microsoft in a deal that
ultimately fell apart.
Last year, Starboard called on Ms. Mayer to consider a
combination with AOL. Months later, Verizon Communications Inc.
acquired AOL for $4.4 billion.
Mike Shields, Dana Mattioli and Ryan Knutson contributed to this
article.
Write to Rick Carew at rick.carew@wsj.com, Douglas MacMillan at
douglas.macmillan@wsj.com and David Benoit at
david.benoit@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
December 01, 2015 21:06 ET (02:06 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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