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The breakup of Yahoo, which has been a slow work in progress for years, is finally moving from threat to reality. A date has now been set—April 11—as a deadline to submit preliminary bids for the Internet pioneer’s Web businesses and Asian assets.
The Wall Street Journal reported late March 28 that Yahoo has asked bidders for details regarding financing, conditions or approvals that would have to be met on their end, in addition to what key assumptions they would be making by deciding to move forward with a deal. The Journal cited a letter sent to possible bidders that it had obtained.
An April deadline for preliminary bids could mean that Yahoo could close a deal by as early as June or July, the Journal said.
“Supposedly, there are about 40 companies that are interested in purchasing all or part of Yahoo’s core businesses,” analyst Rick Wilking of Thomson Reuters said, ironically, on a Yahoo news video. “Verizon has come out and said they are interested, AT&T is interested, as did Time Inc., Disney perhaps. The board has to decide who is serious and who is just tossing a hat into the ring so they can get a look at the books.”
Auction Process Started Last Month
Yahoo’s board launched an auction of its core business in February after it put aside plans to spin off its stake in Chinese e-commerce giant Alibaba Group Holding Ltd. That $30 billion part of the Chinese retail giant was a deal engineered by co-founder Jerry Yang a decade ago and today serves as one of Yahoo’s biggest assets. The company also owns a major stake in Yahoo Japan.
A lot of conflict remains at the board and shareholder levels because CEO Marissa Mayer is still talking about a rebirth of sorts to analysts and journalists—although this may well be a tactic to try to fetch a higher price for the core business from possible buyers.
Activist hedge fund Starboard Value LP, which owns 1.7 percent of Yahoo, launched a proxy fight last week in an attempt to overthrow the entire board of Yahoo. Starboard has a slate of nine nominees that it wants to replace the current Yahoo board. You can read the March 24 letter it sent to shareholders here.
Yahoo has said that it will review Starboard’s nominees and respond in “due course.”
Yahoo and Starboard might still come to an agreement before the company’s annual meeting, expected to be held in June. If they cannot avoid a proxy fight and the Yahoo board election is taken to a shareholder vote, attention will move to several large mutual and index funds that own the stock and are expected to wield heavy influence in the final vote.
Those funds are Fidelity Investments, Vanguard Group, State Street Corp. and BlackRock Inc., which own a total of 16.2 percent of Yahoo stock. Goldman Sachs owns another 4.2 percent, according to Thomson Reuters data.
Yahoo in the Black, but Revenue’s Been Sliding
Mayer has piloted the company to stock-price success during her tenure, yet the activists are still not satisfied because revenues have been shrinking for more than a decade. Yahoo was selling for $14.92 in August 2012 when she came from Google as the company’s eighth CEO. The stock price was $36.32 on March 29, although it was up to $52.37 on Nov. 17, 2014.
The company is still in the black, but this is largely due to Mayer cutting costs substantially. Last month, she announced that Yahoo is trimming 15 percent of the entire workforce this year.
“We have been extremely disappointed with Yahoo’s dismal financial performance,” Starboard said in its latest letter to Yahoo, adding that its need to officially launch a proxy fight was “unfortunate,” according to Reuters.