Bidders Emerge for Yahoo's Internet Business
03 December 2015 - 6:40AM
Dow Jones News
Several potential suitors are emerging for Yahoo Inc.'s core
Internet business, from media and telecom giants to private-equity
firms, as the beleaguered company weighs whether to put it up for
sale.
Among the companies that would likely explore a purchase are
Verizon Communications Inc. and Barry Diller's IAC/InterActive
Corp., people familiar with the matter say. Others may be
interested in pieces of Yahoo, if they become available, including
News Corp., owner of The Wall Street Journal, and magazine
publisher Time Inc., according to executives familiar with the
situation.
A Yahoo spokeswoman didn't respond to a request for comment.
Despite Yahoo's struggles, the potential buyers would be
attracted to the company's vast reach—its properties attract more
than 200 million monthly visitors in the U.S. each month. For
private-equity firms, the appeal may be that taking Yahoo private
would allow drastic restructuring that would be more difficult in
the glare of the public markets. A private-equity firm could, for
example, decide to milk Yahoo for cash flow while cutting back on
investment.
Yahoo Inc.'s board will be considering some significant
strategic options at meetings this week, The Wall Street Journal
reported Tuesday, including a sale of the core business and whether
to proceed with a spinoff of its stake in Chinese e-commerce giant
Alibaba Group, which is currently worth more than $30 billion.
Yahoo may opt not to sell the core business. Brian Wieser, an
analyst at Pivotal Research Group, said in a research note Tuesday
that he values that business at about $1.9 billion, not counting
cash on hand. Another analyst, Youssef Squali of Cantor Fitzgerald,
had valued it at $3.9 billion, not including cash.
Either valuation would be higher than Yahoo is currently
receiving. Yahoo investors are assigning the core business a value
of less than zero, based on the value of its stakes in Alibaba and
Yahoo Japan.
SunTrust analyst Robert Peck said there could be many logical
buyers for the Internet business, including Verizon, AT&T Inc.,
Comcast Corp., Walt Disney Co., and News Corp.
Anyone who picks up Yahoo's core business would inherit some
acute problems. Yahoo's traditional strength, selling desktop
display advertising to major advertisers, is in a broad decline.
The company, once the first stop for many brands when spending ad
budgets online, has been eclipsed by Facebook Inc. and Google Inc.
Yahoo is expected to pull in 4.4% of the $58.12 billion U.S.
digital ad market in 2015, according to research firm eMarketer,
down from 5.1% last year.
For Verizon, acquiring Yahoo would bolster its growing
advertising technology business. The telecom company already spent
$4.4 billion in June on AOL. AOL has specialized in helping
third-party websites sell more ads, while Yahoo brings with it a
vast pool of registration data and email addresses. The combination
of AOL's reach, data from Verizon's wireless business and Yahoo's
data might help create a more formidable rival to ad tech behemoths
Google and Facebook.
Yahoo and AOL have been linked as possible merger partners
before. And AOL's chief executive, Tim Armstrong, stayed on at
Verizon and could be in position to lead a combined Yahoo-AOL.
However, such a deal also would create redundancies. For example,
AOL has a video advertising platform, which it built through the
2013 acquisition of Adap.tv. Yahoo purchased a similar company,
BrightRoll, last year.
Comcast, likewise, has been building up ad tech capabilities
through acquisitions of firms such as FreeWheel and Visible World.
For IAC, whose stable of Web properties includes CollegeHumor and
About.com—and which recently hived off its Match online dating
division—a deal with Yahoo could bring in a high-profile asset with
tremendous reach on mobile platforms. Other analysts point to
Japan's SoftBank Group Corp. as a contender for the Yahoo Internet
business.
The rationale for traditional media companies is less clear.
Yahoo still brings in billions in advertising revenue each year,
and boasts a sizable sales force. For a company like Disney,
Yahoo's audience and direct consumer data could be valuable for
marketing its theme parks and movies. AT&T could look to use
Yahoo's data pool and match what Verizon is trying to accomplish
via its AOL acquisition.
David Benoit, Shalini Ramachandran, Jeffrey A. Trachtenberg and
Lukas I. Alpert contributed to this article.
Write to Mike Shields at mike.shields@wsj.com and Ryan Knutson
at ryan.knutson@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
December 02, 2015 14:25 ET (19:25 GMT)
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