(FROM THE WALL STREET JOURNAL 12/3/15)
By Mike Shields and Ryan Knutson
Several potential suitors are emerging for Yahoo Inc.'s core
Internet business, from media and telecommunications 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 might 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.
Private-equity firm TPG Capital has looked at buying media
properties within Yahoo, according to a person familiar with the
matter.
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 might be that taking Yahoo
private would enable a 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.
The board of Yahoo plans to consider significant strategic
options at meetings this week, The Wall Street Journal reported
Tuesday, including a sale of the core business and whether to spin
off its investment in Chinese e-commerce company Alibaba Group
Holding Ltd., a stake now valued at more than $30 billion.
Yahoo might opt not to sell the core business.
Brian Wieser, an analyst at Pivotal Research Group, said in a
research note Tuesday that he values Yahoo's core business at
roughly $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 what Yahoo is currently
receiving. Yahoo investors are assigning the core business a value
of less than zero, since much of the value of Yahoo's $32 billion
market capitalization is tied up in two large Asian assets, Alibaba
and Yahoo Japan Corp.
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 large 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 advertising 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
previously. 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 advertising-technology
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 SoftBank Group Corp. of Japan as a contenderfor
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 such as Disney, Yahoo's audience and direct
consumer data could be valuable for marketing its theme parks and
movies. AT&T could use Yahoo's data pool and match what Verizon
is trying to accomplish via its AOL acquisition.
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(END) Dow Jones Newswires
December 03, 2015 02:47 ET (07:47 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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