PE firms court News Corp, AOL on Yahoo

Oct 14, 2010 |

Reuters

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Oct. 14: Several private equity firms have approached Internet and media companies including News Corp and AOL Inc to gauge their interest in buying out Yahoo Inc, a source with knowledge of the approaches said.

The news comes as Yahoo, the No.2 search engine in the United States behind Google Inc, struggles to revive its revenue growth under the management of chief executive, Mr Carol Bartz, and to rebuild its buzz among consumers amid competition from social networking sites such as Facebook.

A potential deal would be contingent on Yahoo selling its prized Asian assets, including a 40 per cent stake in China’s Alibaba Group and 34.5 per cent of Yahoo Japan, the source told Reuters on Wednesday on condition of anonymity because discussions were not public.

Talks with News Corp and AOL began about two weeks ago and intensified in recent days, but Yahoo had not yet been approached as talks were still in their early stages, the source said. Yahoo shares, which finished Wednesday up nearly six per cent, gained another 9.5 per cent to $16.71 in extended trading. Shares in Alibaba.com and Yahoo Japan rose in Asia trading.

Speculation of private equity interest in Yahoo, which is also struggling to stem an exodus of senior executives to rivals, has surfaced sporadically in past months.

Silver Lake Partners was among the firms in very preliminary, recent discussions about acquisition scenarios, a second source with knowledge of the matter said. Blackstone had also been pitched the idea but was not currently working on a Yahoo deal, a separate source said. News Corp, AOL, and Yahoo declined comment. Yahoo’s plans for its Asian investments have sprung into the investor spotlight since Yahoo Japan turned to arch-foe Google for its Internet search technology. Once dominant in search, Yahoo has been overshadowed by Google’s growth and its market value is now little more than a tenth of its rival. In Tokyo, Yahoo Japan gained 5.5 per cent and Yahoo Japan’s top shareholder, Softbank Corp, rose 2.9 per cent. Yahoo Japan has a market capitalisation of about $20.5 billion, valuing Yahoo’s stake at about $7 billion.Shares in Alibaba.com edged up 0.3 per cent in Hong Kong.

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