CNBC’s David Faber reported this afternoon that the Microsoft (MSFT)-Yahoo (YHOO) deal under discussion is now worth more than $33–the amount of Microsoft’s final offer for the whole company.
This is presumably an aggregate valuation composed of several assumptions:
*Sale of Yahoo’s Asia assets, which have been estimated to be worth about $8-$10 a share. The NY Post implied this morning that one reason to spin off the Asia assets is that Alibaba is firmly against a Microsoft deal. In any event, liquidating these assets would deliver more cash to Yahoo shareholders.
*Microsoft buys Yahoo’s “search business.” This sounds like a simple concept, but it isn’t. What exactly is Yahoo’s search business? Yahoo is not going to remove the search window from the site, so all it can really sell are 1) its Panama and directory engineering teams, and 2) a long-term monetization contract. Yahoo would be moronic to do a monetization deal longer than a few years (who knows whether Microsoft will even be in the search business in three years), so it is not clear what “buying the search business means.
*Microsoft invests in what remains of Yahoo,” which presumably means that it offers to buy out some Yahoo shareholders. This price could be set in such a way that the aggregate value of the deal is more than $33