This week, Yahoo’s board reviews bids from a range of buyers for a minority stake in the company, including various private equity companies and a consortium that includes Microsoft. But none of these candidates has been able to say publicly what they would do to transform Yahoo.
This is partly because of the unusual way Yahoo’s board structured its negotiations with potential buyers. The board asked companies interested in a partial purchase to first sign confidentiality agreements. The board then gave minority bidders a priority deadline of Monday, Nov. 28 to submit their offers.
Because of the confidentiality agreements, buyers aren’t allowed to publicly discuss their plans even if they wanted to. According to Reuters, both Microsoft and its private equity partner Silver Lake signed confidentiality agreements with Yahoo, as did private equity firms Kohlberg Kravis Roberts and TPG Capital.
“Behind the broad interest in Yahoo is what investors believe is a trove of riches that could be unlocked by providing stronger management,” writes Dealbook’s Michael De La Merced. It may no longer be competitive with Google or Facebook, but “Yahoo remains a formidable destination, with its news site alone attracting 81.2 million unique visitors in August.”
Yahoo’s board has reserved the right to subsequently consider offers for an outright purchase of the company, like the one Microsoft put forward in 2008 and China’s Alibaba is reportedly offering now. (At a minimum, Alibaba wants to buy back Yahoo’s 40% stake in the company — a shrewd 2005 investment that’s become one of Yahoo’s primary assets.) Meanwhile, PE firm Thomas H. Lee reportedly wants to buy just Yahoo’s US operations, for a fraction of what the entire company is worth.
Why the shroud of secrecy? Yahoo’s board is doing everything it can to keep its own shareholders as far away from these discussions as possible. Many of them are and have been dissatisfied with Yahoo’s leadership, stretching long before now-ousted CEO Carol Bartz was hired to turn the company around.
Everyone now seems to agree that Yahoo hiring Bartz was a bad idea; what they disagree on is whether the current board deserves equal blame for the company’s misfortunes.
That’s another reason for the lack of bold, public ideas to reinvent Yahoo. Arguably, this entire bidding process will do much less to transform Yahoo than it will to entrench the status quo and the people responsible for it.
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