by EVELYN M. RUSLI AND VERNE G. KOPYTOFF
Sept 15, 2011
With potential buyers circling above, Yahoo, the once-mighty online empire, is preparing to sell.
The technology giant, which is weighing a sale of all or parts of its business, has attracted the attention of several buyout shops and strategic investors, including the private equity firm Silver Lake, which has already approached Yahoo about a potential bid, two people close to Yahoo said.
Silver Lake, which is working with the venture firm Andreessen Horowitz, has been quietly studying a possible bid for the last six months, one person said. Other potential bidders for Yahoo or its assets include Microsoft and the Alibaba Group.
The renewed interest in Yahoo comes as the company faces a critical juncture.
The sprawling Internet media company, which rose to prominence in the late 1990s for its popular portal, has fallen behind in recent years. While rivals like Google and upstarts like Facebook have boomed in the new Web, Yahoo has struggled to keep pace with the shifting digital landscape.
Last week, in a moment that starkly portrayed its troubles, the board dismissed its chief executive, Carol A. Bartz, by phone. Ms. Bartz, well known in Silicon Valley for her brash attitude and comfort with expletives, joined Yahoo less than three years earlier.
Yahoo's board discussed Silver Lake's approach during its meeting on Wednesday and hired Allen & Company as its investment bank for a continuing review of Yahoo's business. The board also talked about Yahoo's Asian assets, which include a 40 percent stake in the Alibaba Group, a Chinese e-commerce company, and a stake of about 35 percent in Yahoo Japan. In addition to Allen & Company, Yahoo is working with UBS, which already advises the company on its options for its stake in Yahoo Japan.
The Asian investments complicate any buyout of Yahoo.
The board has yet to decide whether to keep those assets, sell them or spin them off, the individuals said. Many analysts consider those holdings the crown jewels of its portfolio, collectively worth more than the sum of the rest of its operations.
The relationship between Yahoo and Jack Ma, Alibaba's chief executive, is strained over a number of issues, most recently the fate of the online payment service AliPay. Last year, Alibaba spun off AliPay into a separate company that Mr. Ma controlled. Yahoo learned of the transfer only after the fact and complained that it had been done by Mr. Ma without the approval of Alibaba's board.
Alibaba and Yahoo reached a deal in July that settled their disagreement. But the relationship between Yahoo and Mr. Ma, who has long said that he wanted to buy back Yahoo's stake in his company, remains strained.
Yahoo, Microsoft, Silver Lake Partners and Andreessen Horowitz declined to comment. Individuals close to the matter spoke on the condition they not be identified because the talks were confidential.
For Yahoo, which rejected a bid from Microsoft in 2008, the crowd of suitors is a familiar one. According to two people with knowledge of the situation, Providence Partners and Peter Chernin, the former chief operating officer of the News Corporation, also are studying a possible bid. This year, Mr. Chernin approached Yahoo about a possible deal, according to one person. But he was rebuffed. Meanwhile, Silver Lake, which recently profited from the sale of Skype to Microsoft, has long been said to be a potential buyer.
Any deal, analysts say, will require substantial financial backing. Yahoo's market capitalization currently stands at $18.8 billion. Yahoo, according to two people, is considering hiring a third bank which could help provide financing. Although analysts have described the company as a "deteriorating asset," it is still one of the Web's largest properties.
"Yahoo is still very important to the ecosystem," said Scott Raney, a partner with Redpoint Ventures. "It has significant scale and it has some of the more interesting advertising technology out there," he added.
Yahoo is facing intense pressure from investors to do something. Daniel Loeb, the founder of Third Point, a hedge fund that owns a 5 percent stake in Yahoo, called for the removal of Roy Bostock, Yahoo's chairman, and of other board members.
AllThingsD earlier reported the list of potential buyers for Yahoo.
