Earlier this year when Yahoo fired its CEO Carol Bartz, who failed to turn around the company’s tumbling revenue, there was plenty of speculation regarding the company’s future and rumors of Yahoo putting itself up for sale hit the markets. Soon big names like Google, Microsoft, AOL and The Alibaba Group were reported to show interest although nothing materialized in the end.
The reason behind a failed deal with most of the bidders was a confidentiality agreement that Yahoo wanted all bidders to sign in order to keep the bidding process more competitive. As per the agreement, the potential bidders could not communicate with each other which often results in multiple parties forming a consortium and presenting one bid. Since most of the interested parties refused to sign the agreement, the buy out process came to a halt.
However according to a recent report by New York Times, software giant Microsoft has finally agreed to sign the non-disclosure agreement with Yahoo so that the software giant gets a closer look at Yahoo’s finances. These developments indicate that Microsoft is contemplating buying the embattled internet company. However the buy out will not be an exclusive change of ownership, but might just be a minority, non-exclusive stake holding in Yahoo.
As per the report, Microsoft and private equity firm Silver Lake are leading a consortium of investors who will buy a minority stake of up to 20% in Yahoo, a proposal for which has already been submitted. The private equity firm TPG, has also been reported to submit a similar proposal for a minority stake of 20% and other firms like Kohlberg Kravis Roberts and Hellman & Friedman have also been cited on the list suitors who might be interested in a buying a minority stake in Yahoo.
On the other hand, China based, Alibaba Group, an e-commerce company, of which Yahoo still holds 40% shares, has been reported to be holding discussions with the Blackstone Group, a private equity firm, about putting down a bid to buy the failing internet company as a whole.
Given than about 10 percent of the company is still held by co-founders Jerry Yang and David Filo, a 20% sell out of the company would give it an opportunity to borrow finances to fund a possible stock buyback.
Yahoo’s board of directors is expected to meet soon to assess the possibility of a minority investment and discuss the future of the company.