How Yahoo Can Afford All These Acquisitions

jackie reses yahoo hrYahoo M&A leader Jackie Reses

Yahoo is in the middle of a serious acquisition spree.

It made a dozen purchases since last October. The biggest of the bunch was Tumblr, worth $1.1 billion in cash. The rest were probably paid for with Yahoo stock, since they were mostly talent acquisitions.

Yahoo is still on the prowl, with a bid for Hulu, and two other deals in the works.

With all this acquisition talk, a lot of people are wondering how Yahoo can afford to buy this many companies.

Even post-Tumblr, Yahoo is still loaded with cash.

Yahoo investor Eric Jackson says it had $5.6 billion in cash on its balance sheet before it bought Tumblr. And when the Tumblr purchase was announced, Yahoo CFO Ken Goldman said Yahoo picked up another $838 million in cash through Chinese Internet company Alibaba.

Yahoo owned a 40% stake in Alibaba, the Chinese e-commerce company. Yahoo only owns 24% of the company today after selling a big chunk of its stock to Alibaba last year.

To buy the shares, Alibaba borrowed money from Yahoo. It repaid that loan to Yahoo, which is how it got another $838 million, says Jackson.

So, pre-Tumblr, this suggests Yahoo really had $6.4 billion in cash. After paying $1.1 billion for Tumblr, Yahoo still has over $5 billion cash to buy whatever it wants.

Plus, Yahoo has more coming. Alibaba is likely to IPO in the next twelve months. At that point, Yahoo’s stake in Alibaba will be more liquid and it can sell shares to drum up more cash should it be necessary.

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