Interest in troubled Internet giant Yahoo has not waned, it just took a break for the holidays. A group of well known Silicon Valley executives and top investment bankers are putting together a Yahoo takeover deal that would be financed largely from debt supplied by Microsoft, we’ve learned from sources with knowledge of the proposed transaction.
Under the terms of the proposed deal, the investment group would make a takeover bid for Yahoo at a relatively low premium of around 20% to its current price of around $13 per share, valuing the company at just over $20 billion.
A complicated financial structure would be put in place to finance the deal, but the bulk of the cash for the transaction would come from Microsoft as debt.
The commercial debt markets are largely closed for M&A transactions today, requiring a creative way to finance this deal. Microsoft would supply the bulk of the purchase price from their $23 billion cash hoard in return for a fixed return on the debt that is tied to Yahoo’s future cash flow. Yahoo has continued to create cash even during this crisis – that cash will be used to pay debt obligations to Microsoft.
Simultaneous to the transaction Yahoo’s search and search marketing business would be sold to Microsoft under terms similar to what Microsoft proposed in June 2008 (and nothing like the bogus reports from The Times in November).
Following the transaction the new executive team would take over the top ranks of Yahoo. A key goal of the new team would be to attempt to attract back much of the executive talent that has fled Yahoo in the last year.
This would leave Yahoo as an independent entity, albeit one closely tied to Microsoft both financially and through the search and search marketing products.
The deal, which is being characterized at this stage as a proposal to Microsoft, absolutely hinges on their involvement. It certainly brings everything the Redmond giant has asked for, namely a way to control Yahoo’s search properties without having to own the rest of the company.
Msft is out of its minds. One hand they say they want to get over with Yahoo deal and on other hand they do all this dirty things. Act like a man Steve Ballmer
I don’t care how Ballmer acts . . . . just get my damn stock price back up!
What do you think all these reports are for?
The deal trolls are having fits over Microsoft’s deep pockets. Now they think, “My piece of paper is better than the other piece of paper.” What does all this horseshit add. Nothing.
Bring back Yahoo executive talent? HA! How Arrington loves to prance about in the land of folly like a Sidwell schoolgirl.
Am I missing somethign or did the number of ads on TC take a complete dive? Where’s the 2 X 5 wall of 125 X 125 pixel ads?
Yet another YHOO takeover rumor…
this one has legs . . . i bought 10k here
In the perpetually forward-moving Internet realm, Yahoo is an “Oldies but Goodies” story that some people have fond memories of, just for nostalgia’s sake. And Microsoft is obsessed with buying Yahoo probably in that spirit – owning a piece of history.
People collect antiques and buy vinyl records, so why not?
All stats are showing that Yahoo still gets “millions upon millions” of clicks, the way a Beach Boys song gets played over and over on the radio. Pennies and nickles do add up. I guess that’s the rationale.
http://www.jugargame.com
Trip?
So, who’s involved? This story is pretty generic, it’s basically “Some guys are talking about pitching Microsoft on a crazy scheme.” Head down to Universal Cafe for lunch and you can hear a dozen grand ideas like this. What’s the major information here that makes you think this plan is credible?
Credible? This is the Internet!
I have been following developments relating with Yahoo quite keenly. I strongly believe that Yahoo should maintain its identity and should invite and encourage any other suitors in future. Yahoo as a brand should continue.
Holy crap. How complicated is that ? Whatever about the other rumours, this one just has to be the least likely to ever happen.
You couldn’t make this stuff up!
$13/share…wow, and just imagine a bid for like $33/share, maybe someday…oh wait, oops…nevermind.
oh, what could have been.
Jerry Yang was working the freeway onramp with a squeegie this morning. If he is interested, I am currently looking for a gardener, well, based on his experience maybe we could start with pulling weeds and cutting the grass.
He’s still richer than you, you pathetic wannabe.
stay off the solvents – you were busy detailing his car and weren’t happy with the tip he left you, right?
A home hydroponics system does not a garden make either.
something will happen. Some day.
Just can’t understand why MSFT would need a group of weasels to approach YHOO when the bulk of cash is MSFT anyways. Nevertheless, interesting post.
Leave it up to the investment bankers to create a new investment vehicle to raise capital: “Yahoo Bank”… followed with an application to the Feds under the TARP program. Only in America
They (MS) need the weazles because they don’t want ownership. They are a direct competitor in a lot of areas – so this is a debt transaction and not an equity transaction. Although I would like to see what’s backing up the debt – apart from the stock being bought.
Yahoo is like a “Living Time Capsule”, permanently stuck in 1999.
Go to Yahoo’s home page and click on its various services (with names like OMG and Bix (?)), and it’s like visiting a “Web 1.0 Museum”.
In the perpetually forward-moving Internet realm, Yahoo is an “Oldies but Goodies” story that some people have fond memories of, just for nostalgia’s sake. And Microsoft is obsessed with buying Yahoo probably in that spirit – owning a piece of history.
People collect antiques and buy vinyl records, so why not?
All stats are showing that Yahoo still gets “millions upon millions” of clicks, the way a Beach Boys song gets played over and over on the radio. Pennies and nickles do add up. I guess that’s the rationale.
This deal makes a lot of sense. In today’s make this is a good deal for the shareholders of Yahoo. People just have to let it go $30+ a share offer was yesteryear. Like the price of oil was $150 a barrel before.
Why would MSFT agree to pay any premium, when YHOO will be selling for $5.00 in another year.
because MSFT can’t wait another year to lose more market share…the time to position for future growth is now…the opportunity cost is too great…
What tells you Yahoo would drop to $5.00? There’s no way it will drop that low. Yahoo is undervalued already, if you look at how much money they make. (It’s still a lot.)
Easily the best deal put forward so far. It does diminish Yahoo’s upside – but I don’t think they have a choice at this point.
it’s also a big vote of confidence in MS’s existing live.com strategy.
Looks like techcrunch is not trying hard enough if it wants to start a rumor. yhoo is already at $12.77. Why would they get sold for $13?
So another way of looking at this:
Microsoft acts like a bank to lend money to these execs so they can buy Yahoo at a 20% premium, and Microsoft gets the search business from Yahoo for small additional fee.
It looks like these execs can’t finance the deal themselves (with the credit market so bad) so they need Microsoft to be the Banker.
R.I.P Yahoo
Sounds like a credible way to get a deal done between Microsoft and Yahoo. It would have been a better way for Microsoft to go about getting Yahoo in early 2008, but at this point they’re saving themselves tens of billions.
I still think it would have been a bad idea to sell to Microsoft, I still think it would be a bad idea to do it now.
But I think *this* deal could be a good idea. In this structure, Microsoft would benefit from having some control over Yahoo, but Yahoo likely wouldn’t end up as yet-another-Microsoft-division, having to ask the Office and Windows division for permission whenever they develop a product, etc.
I think it makes sense for Microsoft, because Yahoo is cheap enough now.
My favorite deal would still be to create a joint venture that provides the search technology. If both companies combined their search properties and invested the same money they invest in search now, they’d finally be able to beat Google on a technology basis, which would finally make them a viable competitor, which would finally create a little more balance on the market.
This proposed deal makes little sense, and quite frankly is unrealistic. The stock is at around $13, meaning a 20% premium brings a purchase price of $15.50 and some change. Icahn is long at $25 for big bucks, no way he allows a transaction of this nature. Moreover, there is no one in charge at YHOO as we speak, not that there was much in the way of leadership when Yang was in charge, but even as inept as YHOO’s board has proven to be, even they can’t be this stupid. They are so arrogant they probably believe the stock is still worth $37 a share.
Those guys are smart. Real smart…
I hope they know what they are getting themselves into though!
Monte
weird, google is down right now?
Why would MSFT need help from a invest group on this deal..makes no sense..MFST should just get a deal done or get out if they don’t want to .put this to rest already
Stupid me for listening to TechCrunch and buying [more] Yahoo today. I understand the buy on rumor and sell on news, but this is the first and last time I’ll pay attention to anything from Tech Crunch. Jeez.
Oh! Duh! Michael must have some Yahoo stock to unload and wanted to get the price up! Didn’t work. Too bad.
why does microsoft want yahoo search anyway, yahoo search is really poopy.
CNBC mentioned TechCrunch on the air today when attributing the source of this story.
Yup. they CNBC sure did.
Selling Yahoo’s search to Microsoft is like taking the eyes from a blind man. It’s really not going to make any difference. Microsoft will still screw it up.
Look what happened when they decided to break away from using Google’s results. They fell flat on their face. Why? Because they don’t know search. They barely even know OS, but they’ve fooled the public into believing they did over these many years so much that some of us use computers running it. Why? Because at some level it functions. It does not deliver the superior user experience although for gaming they are fun.
Microsoft taking over Yahoo search will basically mean a Google Monopoly in search. Yahoo’s structure will collapse and the implementation will fail much as MSN Search did which is why Microsoft is knocking at the door begging to buy it.
What you do is maintain control of search, license it to them with a big up front fee, allow them to profit, you to profit and in the meantime you court licensing deals with every major corporation on the planet to implement yahoo search in their intranets and extranets so that you’re everywhere.
Yahoo search delivers cleaner more accurate results than Google does and google knows that.
Additionally you restructure the advertising model and editorial processes so that more advertisers are coming to you for the cleaner results and will be willing to pay more for those results as well.
Google in the end will fold its advertising model as its PPC will become cheap and irrelevant.
There’s many solutions to the problem but this deal is fraught with issues and the #1 of them being that Microsoft buys Yahoo search.
Selling the foundation of the company without a viable replacement is not smart at all.
Michael Murdock, CEO
DocMurdock.com
(and the person who can turn Yahoo into so much more)
You are mostly correct, but for the fact that MSFT just hired YHOO’s top search guy. Ballmer is clueless in search but if he lets Dr. Qi Lu do is job and stays the hell out of the way, MSFT may actually make up some ground. No I grant you that Ballmer keeping his massive ego in check to allow this to happen isn’t 100% certain but you would think after his horrible year in ‘08 that he’d let others do what they were hired to do. Ballmer will ultimately do a deal with YHOO ( nothing like what is described in this article ) but nonetheless Ballmer will do a search deal with YHOO and let Dr. Lu do what Yang was woefully incapable of doing, which was to monetize in a meaningful way, YHOO’s once dominate search business.
and the other thing we’d do is within 12-18 months we would double if not triple the current market valuation of Yahoo, Inc. That’s our promise to investors. – MM
Don’t worry — no one is taking TechCrunch seriously. Yahoo’s stock crashed today along with the market. Little TC can’t make things happen.
Is anyone else sick to death of hearing the name Carl Icahn?
So everybody in the industry seems to be debunking this article. How about issuing a retraction and apology for spreading misinformation and rumors?
Another silicon valley icon might bite the dust. I hope not atleast not microsoft!!!!
Yang, time to resign already.
Oh yea, and stop using your blackberry while cruising in the CL65…idiot.
Despite rumors of this bid, I don’t think Yahoo is the position to be taken over. Their fluctuating stock price isn’t anything particularly new, even if it’s been down lately. I think it will be a while before we see any acquisitions or mergers come by.
Evan
http://www.beyondrace.com
i hope yahoo goesout off business
i hope thhey crumblle