Do I hear $16.50 a share? $18? $20? No, you do not. You hear noise. Reports that several private equity firms, and perhaps Microsoft, have put bids in front of Yahoo’s board suggest that the ageing internet colossus is getting lowballed. The numbers being waved about on Wednesday mean nothing without information about how Yahoo plans to dispose of its minority stakes in Yahoo Japan and Alibaba. Those two companies have offered to buy Yahoo out of its stakes.
Yahoo’s chunk of Alibaba is worth perhaps $13bn; the Yahoo Japan stake is worth another $6.5bn. But a straight sale to the majority shareholders would mean writing a multibillion-dollar tax cheque. A so-called “cash-rich split off” would avoid taxes altogether but require Yahoo to take cash along with assets – in a maximum ratio of two-thirds to one-third, respectively – in return for the stakes. Those assets might have to be acquired beforehand by Alibaba and Yahoo Japan, and would make up a big part of the new Yahoo’s value.
Will Yahoo get a good deal on them? If this sounds complicated, it is. It is natural to wonder if Yahoo’s board, which has made a hash of simpler things, is co-ordinating the private equity and Asian asset negotiations so that trapped value is not only released but captured by current shareholders rather than the private equity newcomers.