Yahoo Inc. appears to have decided to approach potential buyers and private equity buyers for spinning off its core business. The struggling internet company may initiate the process as soon as Monday, said a few people who were familiar with the process. Magazine publisher Time Inc. could be one of the top potential bidders among other interested parties.
Yahoo announced through a statement last week that it had formed a committee to “explore strategic options” for the company’s core business. Without clearly indicating that the company is looking for potential buyers for its internet business, Yahoo board chairman Maynard Webb said the following.
“We have hired excellent [advisers] and are working closely and in alignment with management to pursue an effective process. The Board is thoroughly committed to exploring strategic alternatives while simultaneously supporting management and the employees in their implementation of Yahoo’s strategic plan.”
The carefully worded statement cleverly hints that the company isn’t advertising about the sale, but appears keen to conduct meetings with interested parties. The company may not openly admit it, but Yahoo is under tremendous pressure from investors as it continues to struggle to improve monetization of its digital assets, while the internet company struggles against internet giants like Google and Facebook. Activists and shareholders have routinely submitted scathing reports about Yahoo and many have even condemned it for substantially increasing overheads during a relatively brief tenure.
Yahoo’s statement mentioned that Goldman Sachs Group Inc., JPMorgan Chase & Co. and PJT Partners Inc. will provide financial counsel. Moreover, the new committee is expected to “reach out” to potential buyers and offer their recommendations on any proposed transactions.
Though no company has openly admitted it, potential list of buyers includes telecommunication companies like Verizon Communications Inc., Comcast Corp., and AT&T Inc. Other interested parties include buyout firms including Bain Capital Partners, KKR & Co. and TPG, reported Bloomberg. Unfortunately, without any confirmation from the internet company, the list is just conjecture at this point. Interestingly, some industry experts stated if Apple intended to compete against Google and Facebook, acquiring Yahoo’s core business could be one of the wisest investments the Cupertino-based company could make.
Despite its relatively small size, Time Inc. might be one of the most serious contenders to make a bid for Yahoo’s acquisition. Bloomberg reported that the $1.5 billion owner of magazines including People, Sports Illustrated, Time and Fortune, has heard a presentation from Citigroup Inc. bankers on pursuing a deal to merge with Yahoo. While others would undoubtedly look at outright acquisition or to hold majority controlling stake, Time Inc. may be open to more collaborative options including merger. People privy to the information hinted Time Inc. could pursue a structure with Yahoo, commonly referred to as the Reverse Morris Trust. A tax-free transaction in which one company merges with a spun-off subsidiary, could allow Time to effectively merge its operations with Yahoo that could allow the former to bridge the wide gap between magazines and internet based live publishing.
Would Marissa Mayer continue as Yahoo’s CEO post buy out? Yahoo had appointed Mayer with the express purpose of helping the struggling internet company rise. She was tasked with the responsibility of devising strategies and shed non-performing assets, while increasing monetization of all the digital properties. However, it is apparent that the company hasn’t been able to climb out of the trenches, at least at a respectable pace.
Mayer still hasn’t given up hope, reported Washington Post. She recently announced a plan last month to cut 1,700 jobs. As part of the restructuring, the company is expected to shutter even more services and focus on fewer products in the hopes of better monetization through reduced overheads and increased efficiency. After shuttering Yahoo Food, Yahoo Health, Yahoo Travel, and Yahoo Autos, the internet company will now focus on four main areas: news, lifestyle, finance and sports.
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