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February 21, 2008

News Corp.-Yahoo Discussion Go On. And On.

Michael Arrington

31 comments »

News Corp. has essentially planted four or five deal guys at Yahoo HQ, working directly with Yahoo business development to try to find a deal to combine MySpace and Yahoo that both sides can swallow. The News Corp. team is led by Jack Kennedy, Fox Interactive Media’s EVP Strategy and Corporate Development, says a source with knowledge of the discussions. According to another source, the team was as Yahoo again on Wednesday, and has been there most of the last two weeks.

We reported on what the bid might look like on February 12:

According to our source, the deal structure would spin off Fox Interactive Media (the primary asset is MySpace, but IGN, Scout Media, Photobucket, Fox Sports, AmericanIdol.com, Flektor, Ksolo; plus investments in Hulu, Simply Hired and Snocap are also assets of FIM) into Yahoo, along with a big cash injection from News Corp. and an unnamed private equity fund. The total investment would be valued at around $15 billion.

Yahoo would be valued at somewhere around $50 billion before the transaction, north of Microsoft’s $44.6 billion bid. That would leave News Corp., plus the private equity group, with more than 20% of the combined entity. They’d be the largest single stockholder and effectively in control of the combined Yahoo/FIM entity and their nearly 150 billion monthly page views (which would be second only to Google).

As far as we know the potential deal structure hasn’t changed, and they are still hung up on how to make the merger work without getting Google involved to take on search marketing. The team was expecting Microsoft to up its bid last week, forcing the Yahoo board to make a move. But Microsoft is taking things directly to shareholders, a time consuming move. That gives News Corp. more time to get their deal to pencil out.

It’s possible that at the end of this ordeal we’ll see a Yahoo/MySpace combined company, with News Corp. as the biggest shareholder. But to do that these guys need to pull the trigger on a bid. It’s time to make a move, or fly back to LA.

  • Sphere It

This entry was posted on Thursday, February 21st, 2008 at 2:56 am and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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Comments

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  1. YDRIVE

    February 21st, 2008 at 3:00 am

    Time for Microsoft to up their soft bid for Yahoo!… 8-)

  2. Scabr

    February 21st, 2008 at 3:08 am

    News Corp. + Yahoo looks more natural than Microsoft+Yahoo.

  3. Strubit

    February 21st, 2008 at 3:08 am

    “News Corp. has essentially planted four or five deal guys at Yahoo HQ for nearly two weeks straight now”

    So… did MSFT do the same? Or is a deal this big result in only working with Steve and Bill direct?

    It would be funny. These “deal guys” (one set from NWS, the other from MSFT) walking around the hallways of Yahoo, avoiding each other during the day, only to enjoy beers in the evening debating how big their bonus will be.

  4. Rajiv Singh

    February 21st, 2008 at 3:23 am

    Yahoo should lay off all employees and outsource all jobs to India.

  5. Tommy

    February 21st, 2008 at 4:14 am

    @Strubit: The MS-deal wasn’t directed at the company Yahoo!. It was directed at the shareholders of Yahoo!. In other words, it was a hostile take-over bid. There were, as far as we know it through the media coverage, no direct contacts between Bill-Steve and the Yahoo! management. Instead Bill-Steve addressed the individual shareholders directly.
    The News Corp guys on the other hand, are speaking with the management at Yahoo! about the proposed deal and how that could be set up. Once the Yahoo! management and the News Corp “deal-guys” are on speaking terms about the deal, the Yahoo! management, through the CEO Jerry Yang, will present the deal to the board of directors and, assuming they approve it, recommend the individual shareholders to accept the proposed deal.

  6. Rm

    February 21st, 2008 at 5:31 am

    I think the internet is just getting boring, yea i think alot of these startups are really cool, but is it getting to the point where its all about the buyout of a company that gets it really exciting. I want to see something that just blows mind freaking mind! Im tired of hearing about another buyout or another damn video site lol. I think its time for someone to put something damn good out.

  7. linebloo

    February 21st, 2008 at 5:54 am

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  8. David Bain

    February 21st, 2008 at 6:05 am

    Does no one have the cajones to point out the obvious fact: NEWS CORP IS EVEN LESS COOL THAN MICROSOFT!! Rupert Murdoch has gotten his brands, especially Fox “news”, all mired in politics to the point that anything he touches loses value. Even a devout independent like me can clearly see this.

    It could be argued that the Dow Jones and My Space are less subject to this “reverse Midas effect” because their constituencies are either already stodgy like Murdoch himself (WSJ readers) or too young / too frivolous to be politically engaged (MySpace party people). But Yahoo targets everyone, and is therefore VERY vulnerable to any association with News Corp. Yahoo does not yet have truly unique services and therefore relies on paper-thin preferences (or even whims) for being chosen by consumers for search, etc. In other words, a Yahoo- News tie-up would lose value from day one. I mean, its not like this is a political year or anything :)

    If Jerry Yang really wants to turn his lemons into lemonade, he is going to have to take a more orthogonal approach. For example, he could get his tush on a plane to Beijing and pursue a poison pill deal with Hua-wei Technologies (making Yah-wei)! I’ve got a few more serious suggestions that I won’t post so as not to spoil Yang’s surprise in case he happens to be hiding these aces up his sleeve ;)

  9. YDRIVE

    February 21st, 2008 at 6:17 am

    he could get his tush on a plane to Beijing and pursue a poison pill deal with Hua-wei Technologies (making Yah-wei)!

    or mightbe easier simply with Cisco… just across the streets.. Ciscoo! or Yahisco! sounds better… 8-)

  10. George

    February 21st, 2008 at 6:47 am

    Is there a possible suitor that doesn’t suck for yahoo? Both companies have a track record of running things into the ground. At least Microsoft is a technology company that cares about the tech people and property at yahoo. News corp just wants more audience for content.

  11. Ray Burt

    February 21st, 2008 at 6:51 am

    Maybe this is what Ballmer wanted all along….he just accelerated it and upped the News.com price for it…..

  12. Psilens

    February 21st, 2008 at 7:59 am

    The funny thing about the idiom “stuck between a rock and a hard place” is, if you don’t use either one to push the other away, you’ll be crushed in the end. I say Yahoo should buy Microsoft :))

  13. Alex Hammer

    February 21st, 2008 at 8:03 am

    News Corp. may or may not decide that they want to win, but Microsoft - at this point for a variety of reasons - cannot really afford to lose.

    And I don’t see them losing.

  14. drew olanoff

    February 21st, 2008 at 8:16 am

    The “Big Stall” is on at Yahoo!

  15. bs

    February 21st, 2008 at 8:29 am

    noone should make a deal with news corp.

    Myspace is going to end up as the next geocities. Its a graveyard right now noones on it, everyone transitioned to facebook.

  16. Jaisen

    February 21st, 2008 at 8:39 am

    @bs - you sure about that?

    http://siteanalytics.compete.c.....?metric=uv

  17. Ryan

    February 21st, 2008 at 8:46 am

    @bs

    Agreed, but I think that’s actually an added incentive for NewsCorp to make the deal…acquire Yahoo!’s base (including the Blue Lithium network), overlay all of their targeting/profiling technology, and the Right Media Exchange, and plug MySpace into that Y! ecosystem — enriching it with del.icio.us, Flickr, Jumpcut, UpComing, etc.

    Would definitely provide some lifeblood to MySpace, FIMs flagship asset…

  18. Mr. Recycle

    February 21st, 2008 at 10:02 am

    An independent Yahoo is better for Yahoo, better for Yahoo employees, better for Yahoo users, better for the internet, better for competition, and probably even better for Microsoft. The big winner in a MSFT hostile take over is wall street fat cats, day traders, and the other financial monkeys whose short term focus on quarterly earnings are killing the best companies ability to compete long term. I guarantee that 5 years from now an independent Yahoo (whether News Corp gets a 20% stake or not) will have grown more than MSFT in the same period.

  19. Chris

    February 21st, 2008 at 10:52 am

    I think a deal with News, Corp. is the worst case scenario for Yahoo. While Microsoft might not be the best bed-mate, at least (as was previously pointed out) they are a tech company, and have indicated how much they value Yahoo’s engineers. Murdoch & Co. are strictly about the money.

    Either way it goes, Mr. Yang and the board need to get out of the spotlight, and get down to business - oh, and they need to decide exactly what that business is going to be.

  20. Cyrano

    February 21st, 2008 at 11:13 am

    Myspace + Yahoo makes me sad. Yahoo, in my opinion, has been on an uptrend when it comes to innovation and embracing the real spirit of Web 2.0. Myspace is outdated, on a downtrend, and needs some serious, serious revamping if they want to compete with Facebook (which, again, has embraced Web 2.0).

  21. jim

    February 21st, 2008 at 12:03 pm

    Is anyone talking about the ramifications of NewsCorp’s Scout being associated with Yahoo’s Rivals? These are the top college recruiting websites and are huge rivals.

  22. rubu

    February 21st, 2008 at 1:40 pm

    The big winner in a MSFT hostile take over is wall street fat cats, day traders, and the other financial monkeys whose short term focus on quarterly earnings are killing the best companies ability to compete long term.

  23. Joe

    February 22nd, 2008 at 5:47 am

    Yahoos dseperate bid to stay independent by trying to strike a deal with Murdoch is pathetic, what’s even more pathetic is that if Yahoo gives Google it’s search buisness, Google will efectively gut Yahoo from the inside out.

    There will be no need for all the engineers that Yahoo has now, they will all be repalced by Googles seach buisness and infrastructure.

    Yet in the end I hope it falls apart, Microsofts revenew is going up, I hope the Yahoo deal goes away.

  24. Ulisses Giorgi

    February 24th, 2008 at 6:56 am

    If Yahoo is the second only to Google and has 150 billion pageviews/month, how many pageviews does Google have? I tried to find that out with no success.

    Anybody knows?

    Thanks,

    Ulisses

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