November 30, 2011 11:59 pm

Yahoo board weighs rival investment offers

Yahoo’s board was considering rival investment offers on Wednesday that could bring new management and strategic direction to the embattled US internet company, but which carried little premium to its share price.

The offers, from groups led by private equity firms Silver Lake and TPG, are the first concrete proposals to come from the strategic review launched three months ago after the sacking of chief executive Carol Bartz.

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Meanwhile, other private equity groups, including Blackstone, Bain Capital and Providence, were discussing a potential bid for all of Yahoo in partnership with Alibaba, the company’s Asian partners, and Softbank. No firm bidding group had yet emerged from the talks and one person familiar with the discussions said there was no certainty a full bid for Yahoo would emerge from the discussions.

The prospect that Yahoo will sell a large minority stake has angered some shareholders, who complain that the main effect would be to strengthen the current board’s hand in any battle of control for the company. Yahoo’s shares missed out on a strong stock market rally on Wednesday as reports of the offers spread, though the stock has risen by more than 20 per cent since Ms Bartz’s departure, to $15.71.

Yahoo believes that the best way to revive its core business and lift its shares is through the addition of minority investors capable of bringing in more innovative management and giving it a stronger strategic direction, according to one person close to its thinking.

The Silver Lake group, which includes Microsoft, Silicon Valley venture capital firm Andreessen Horowitz and the Canadian Pension Plan Investment Board, has offered to pay $3bn for a stake of about 13 per cent at a price of $16.60 a share, according to people familiar with the proposal. The plan would also involve Yahoo borrowing heavily to boost its cash position, with some of the money paid out to shareholders and the rest kept to invest in its online services.

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The fight to acquire Yahoo continues amid shareholder frustration at the online company’s progress after the sacking of chief executive Carol Bartz

The offer is contingent on the group being able to raise finance, though one person familiar with the proposal said the Silver Lake group would have little difficulty in securing a commitment letter from banks.

The rival TPG offer is for a higher price of $17.50 a share. One person familiar with the plan said the offer was backed by a number of other investors.

Though offering a lower price, the Silver Lake group hopes to win over Yahoo with the strategic merits of its offer. It would include the appointment of a new chief executive nominated by the investor group as one of four new directors to be added to a new 10-person Yahoo board.

Marc Andreessen, the former Netscape co-founder and one of the Valley’s best-connected internet entrepreneurs, is among the names put forward as a director, according to a person familiar with the proposal.

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