AOL and a bunch of private-equity firms are talking about making a play for Yahoo, Jessica Vascellaro and Anupreeta Das of the WSJ report.
This follows our own report of two weeks ago that private-equity firms had reached out to AOL CEO Tim Armstrong to discuss this idea and that Tim was open to it.
The private-equity shops cited by the WSJ include Silver Lake and Blackstone, two of Wall Street’s largest PE firms.
This deal could take one of a couple different forms:
- Yahoo could sell the 40% passive stake it owns in China’s Alibaba, and then the private-equity firms could raise the capital necessary to buy the rest (this could be done without AOL).
- AOL could do a reverse merger into Yahoo, sell the Alibaba stake, and then take over the company (this could be done without private-equity).
As we’ve previously discussed, all these deals make sense strategically.
AOL is not large enough to survive on its own (unless it, too, slims down radically and focuses). The companies’ assets are very complementary, and combining them would make the resulting company considerably more powerful (though still beset with challenges). Lastly, there is no reason for Yahoo to own a 40% stake in Alibaba.
According to the WSJ, Yahoo has not yet been consulted about these proposed deals. The company would probably fiercely resist them, especially because any offer made would likely be far lower than the $33 a share offer Yahoo rejected from Microsoft two years ago.
Yahoo investors are getting frustrated with the company’s stagnation, however, so a takeover effort would likely quickly win many shareholder allies.
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