Yahoo Gains as Alibaba-Led Group Prepares Bid
Yahoo climbed 4.1 percent to $16.36 at 9:54 a.m. New York time after rising as high as $16.46. A bid may value Yahoo at more than $20 a share because of tax savings tied to its stakes in Alibaba and Yahoo Japan, said two of the people, who declined to be identified because the discussions are private.
Yahoo’s board is meeting to discuss offers it received for a minority stake from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter said this week. Silver Lake’s bid valued Sunnyvale, California-based Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.
Some Yahoo investors say they would prefer the company be sold in its entirety, at a higher price. “It definitely has to be much higher than $16.60,” said Di Zhou, a Santa Fe, New Mexico-based analyst at Thornburg Investment Management, which oversees about $80 billion in assets, including Yahoo shares.
While the Alibaba group has prepared financing for a possible offer, it hasn’t decided on a final price or whether to proceed, the people said. The group would prefer to be invited to bid rather than going hostile, one person said. Alibaba hasn’t informed Yahoo of its possible bid, this person said.
No Decision Yet?
“Alibaba Group has not made a decision to be part of a whole-company bid for Yahoo,” John Spelich, a spokesman for Hangzhou, China-based Alibaba, said in an e-mailed statement.
At $20 a share, Yahoo would be valued at 24.1 times earnings in the past 12 months, data compiled by Bloomberg show. That would compare with 20.4 times for Google Inc. (GOOG) and a ratio of 9.5 for Microsoft Corp.
The $20 price tag would undervalue the company because its Asian assets have so much growth potential, said Thornburg’s Zhou, who puts the value at about $25 a share. Yahoo, the largest U.S. Internet portal, owns about 40 percent of Alibaba, the top e-commerce site in China, and 35 percent of Yahoo Japan.
Zhou wants to see Yahoo hold on to the Alibaba stake until the Chinese company can do an initial public offering, providing a windfall to investors.
“Chinese Internet penetration and e-commerce is going well,” she said. “It should be more valuable by the day.”
Alibaba is in discussions with international banks for loan financing to back the potential bid, according to three people familiar with the matter.
Alibaba asked lenders to provide proposals detailing how much financing they can provide for the potential buyout, said the people, who asked not to be identified because the details are private. The financing will be more than $1 billion, said two of the people. The terms of the loan, including size and the interest rate, haven’t been determined, the people said.
“It is not true Alibaba is soliciting proposals for funding to acquire Yahoo,” Spelich said by phone.
Alibaba is seeking to buy back the stake in its company that Yahoo owns. Softbank, meanwhile, wants to acquire the stake in Yahoo Japan, one of the people familiar with the matter said. In the proposed deal, Blackstone and Bain would take control of the U.S. operations, the person said.
Spokeswomen for Blackstone, Softbank and Yahoo declined to comment.
Alibaba Chief Executive Officer Jack Ma said in October that his company is interested in purchasing Yahoo. Earlier attempts by the Chinese e-commerce leader to buy out Yahoo’s stake faltered amid disagreements with former CEO Carol Bartz. Yahoo acquired the Alibaba stake for about $1 billion in 2005.
While Alibaba is in advanced talks with Blackstone and Bain, the company is also in discussions with other private- equity firms, including Providence Equity Partners Inc., about an offer, one person said.
Ken Sena, an analyst at Evercore Partners Inc. in New York, puts Yahoo’s total value at about $18 a share, with $5 coming from the U.S. Internet business. The so-called off-balance-sheet assets -- including the Asian investments -- are worth $11 a share, plus $2 in cash, he said. By buying the whole company, Alibaba would avoid having to negotiate over how much Yahoo’s main business is worth, Sena said.
“Almost two-thirds of the enterprise value is really these off-balance-sheet assets,” he said.
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