Tags: Yahoo | Goldman | Takeover | Approaches

Yahoo Said to Work With Goldman to Fend Off Takeover Approaches

Thursday, 14 Oct 2010 09:58 AM

Yahoo Inc., which spurned an unsolicited offer from Microsoft Corp. in 2008, is working with Goldman Sachs Group Inc. to help defend against possible takeover approaches, said three people familiar with the matter.

While the Sunnyvale, California-based company hasn’t received an offer, Yahoo has been working with advisers for about two weeks to field any approach, said the people, who asked not to be named because the talks are private. AOL Inc. has talked with private-equity funds including Silver Lake about a possible bid, two people familiar with the matter said.

Yahoo surged 13 percent in extended trading, headed for the biggest gain since February 2008, when it received an offer from Microsoft. The developer of the Windows operating system withdrew its near-$50-billion bid three months later and Yahoo has since fallen almost 50 percent, fueling speculation that the Internet company is vulnerable to fresh overtures.

Yahoo is “perhaps more valuable to a financial buyer able to unlock the value of the assets in a private setting,” said Youssef Squali, an analyst with Jefferies & Co. Such a move would allow management “to make the choices” that can drive a turnaround without the scrutiny of public markets, he wrote in a research note this month.

Discussions between AOL and private-equity firms are preliminary and have recently focused on a possible purchase of parts of Yahoo, two people said. The private-equity funds have weighed raising $10 billion to $12 billion, these people said.

Neither AOL nor private-equity funds have made an approach to Yahoo, the people said. Representatives of AOL, Yahoo and Goldman Sachs declined to comment.

Takeover Defense

Yahoo General Counsel Michael Callahan has been in charge of the takeover-defense effort, two people said. The company’s internal thinking is that an outsider may be interested in Yahoo’s 39 percent stake in China-based Alibaba Group Holding Ltd. that analysts say is worth about $10 billion, these people said.

John Spelich, Alibaba’s spokesman in Hong Kong, didn’t immediately reply to requests seeking comment.

Alibaba, China’s biggest electronic-commerce company, said last month it offered to buy back its stake in May, though the talks collapsed the following month.

Alibaba no longer needs Yahoo, which is adopting Microsoft’s Bing search technology, as a partner because the U.S. company is phasing out its own search technology, David Wei, head of the Chinese company’s Alibaba.com Ltd. unit, said Sept. 10.

Buyback Agreement

Alibaba Group sold the stake to Yahoo in 2005 for $1 billion and ownership of Yahoo’s Chinese unit. Under the agreement, Alibaba would have the right to buy back the stake if Yahoo were to be taken over, according to a 2005 SEC filing.

The Hangzhou-based parent of Hong Kong-listed Alibaba.com operates Yahoo’s local website and other Internet businesses, including Taobao.com, China’s biggest online shopping site.

Yahoo also owns 35 percent of Yahoo Japan Corp., operator of the nation’s most visited Web portal. Fumihiro Ito, a spokesman at Yahoo Japan’s largest shareholder, Softbank Corp., said the company is sticking with its intention of holding of holding on to its stake.

Yahoo began preparing for an outside offer after some of its advisers picked up tips that private-equity funds were trying to raise money for a takeover, these people said.

Private-equity firms, bankers and some Yahoo investors have been pitching the idea of a Yahoo takeover to AOL and News Corp., according to a person familiar with the conversations. The idea is that Yahoo should focus on being a media company and align itself with another media-focused company, the person said.

Leaving Bartz

A combination of AOL and Yahoo would bring together Web properties that have struggled against Google Inc. and Facebook Inc. Yahoo, under a turnaround effort by Chief Executive Officer Carol Bartz, announced last month the exodus of three of its top managers after reporting second-quarter sales that missed analysts’ estimates. AOL, also in a turnaround effort, was short of sales estimates in its second quarter after being spun off from Time Warner Inc. last December.

This isn’t the first time the combination of AOL and Yahoo has been considered. Time Warner Inc. CEO Jeff Bewkes said in December 2008 that talks about possible deals for AOL were under way with Yahoo, Microsoft and Google Inc. When those talks didn’t lead anywhere, Time Warner opted for a spinoff.

News Corp., based in New York, owns the Wall Street Journal, Fox News, a film studio and MySpace. AOL, since its December spinoff from Time Warner, has been trying to reshape itself into a media-driven company by investing in community news and niche online content and last month buying news blog TechCrunch Inc. A spokeswoman for News Corp. declined to comment.

The technology blog AllThingsD previously reported that companies including AOL and Silver Lake have weighed an offer for Yahoo.

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Yahoo Inc., which spurned an unsolicited offer from Microsoft Corp. in 2008, is working with Goldman Sachs Group Inc. to help defend against possible takeover approaches, said three people familiar with the matter.While the Sunnyvale, California-based company hasn t...
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