Jan. 5 (Bloomberg) -- The Weather Channel and WebMD Health Corp. are among companies Yahoo! Inc. is interested in owning as part of a tax-efficient asset swap with Alibaba Group Holding Ltd. and Softbank Corp., said three people with knowledge of the matter.
Yahoo drafted the wish list of assets, which also includes AutoTrader.com Inc., before appointing former EBay Inc. executive Scott Thompson as its new chief executive officer yesterday, said the people, who declined to be identified because the matter is private. Thompson might add or change the assets, and a deal may fail to materialize, one person said.
Yahoo is considering a range of opportunities, including specific investments or dispositions of assets, Chairman Roy Bostock said yesterday in a statement announcing Thompson’s hiring. The Sunnyvale, California-based company estimated in October its Alibaba stake was valued at about $14 billion on a pretax basis. Yahoo’s current market value is $19.4 billion.
Splitting off the Asian assets “is a key part of the solution to unlock shareholder value,” Jordan Rohan, an analyst at Stifel Nicolaus & Co., said in a report today. “In addition to overhauling company operations, one key role of Scott Thompson as CEO is to oversee the selection of assets that may be included.”
In one potential transaction, Alibaba would consider buying the Weather Channel so it can exchange the asset for a stake in itself owned by Yahoo, according to the people. Softbank, which is working with Alibaba, may explore using WebMD as part of the exchange to acquire the 35 percent stake in Yahoo’s Japan joint venture, said the people.
Neither Yahoo nor its Asian partners are currently in talks to acquire the Weather Channel, which is owned by Comcast Corp. and private-equity firms, said the people. Given the complexity of the proposed deal and the number of parties involved, an agreement might be months away if it occurs, they said.
Yahoo declined to comment in an e-mailed statement, as did spokeswomen for the Weather Channel and closely held AutoTrader.com. A WebMD spokeswoman didn’t immediately return calls.
Yahoo may still seek to receive an asset valued at more than $5 billion, even if WebMD or Weather Channel aren’t part of the transaction, the people said. Softbank and Alibaba might also join forces to buy just one asset worth one-third of their combined deal with Yahoo, one of the people said.
Other logical targets may include personal finance website Bankrate Inc., online travel site TripAdvisor Inc., and smaller companies such as XO Group Inc. and InfoSpace Inc., said Rohan, the Stifel Nicolaus analyst.
WebMD, which has a market value of about $2.2 billion, is working with Credit Suisse Group AG to explore a sale in a process that has attracted the interest of several private equity funds, according to people close to the situation. The New York Post reported Softbank’s interest in WebMD last month.
The fact that WebMD is in advanced talks to sell itself makes it a less likely target for Softbank because the Japanese company has first to reach a deal with Yahoo, said the people.
NBC Universal, now owned by Comcast, as well as Bain Capital LLC and Blackstone Group LP bought the Weather Channel from Landmark Communications Inc. in 2008 for about $3.5 billion, a person close to the situation said at the time.
Bain and Blackstone raised the idea of combining Weather Channel with Yahoo in December when those firms were actively exploring an acquisition for all of Yahoo with Alibaba and Softbank, said two people.
The transaction being proposed by Alibaba and Softbank, in which Yahoo would cut its stake in Alibaba to about 15 percent from 40 percent, values the Asian assets at $14 a Yahoo share, or more than $17 billion, one person close to the situation said Dec. 22.
Yahoo fell less than 1 percent to $15.64 in New York trading today.
The asset-swap strategy would let Yahoo shed its stakes without paying capital gains taxes in the U.S. Alibaba and Softbank would each create a subsidiary into which they would put several billion dollars of cash and operating assets, the person said. The two Asian companies would then swap the so-called splitcos for the Alibaba and Yahoo Japan stakes, while Yahoo would keep its U.S. business and all of its cash, said the person.
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