Yahoo: Microsoft signs NDA

This article is provided to FT.com readers by dealReporter—a news service focused on providing insightful intelligence on event driven situations to investors. www.dealreporter.com

--------------------------------------------------------------------------------

Microsoft (NASDAQ:MSFT) has joined the group of private equity firms that have signed non-disclosure agreements with Yahoo (NASDAQ: YHOO) regarding a potential transaction, a source familiar with the situation told dealReporter.

The source said it was his understanding that Sunnyvale, California-based Yahoo’s board of directors is scheduled to meet next week to discuss a number of different ways to move forward with a transaction.

Microsoft has a search and advertising partnership with Yahoo and tried to acquire the internet company in 2008. Yahoo declined comment and Microsoft did not immediately return a request for comment.

Yahoo’s board appears to be leaning towards a leveraged recapitalization, the source noted. An industry banker said it is likely too early for Yahoo to have narrowed its options to a recap, especially given likely opposition by shareholders to this option.

Alibaba has not been coming forward in a strong enough way to support a bid, partially because of fears the US government will not support a transaction, the source said. There is also doubt that the financial markets can support a deal for Yahoo, the source said.

This news service has previously reported that a leveraged buyout of all of Yahoo would be challenging and that some private equity suitors are only interested in acquiring the US operations once its stakes in valuable Asian assets like Alibaba are sold off. Softbank, another shareholder in Alibaba, valued the group at USD 35bn, according to a recent Softbank presentation.

By some estimates, the core Yahoo business could only be leveraged up to 3x EBITDA. PEs and Alibaba have been reaching out to lenders, it was previously reported by this news service.

It was also reported that some potential bidders are somewhat ahead of others in their analysis of how to move Yahoo forward, such as technology and media specialist funds Providence Equity Partners and Silver Lake, as well as more generalist private equity funds such as Kohlberg Kravis Roberts and TPG Capital.

--------------------------------------------------------------------------------

For more information or to inquire about a trial please email sales@dealreporter.com or call Europe/EEMEA: +44 (0)20 7059 6160 Americas: +1 212 686-3076 Asia-Pacific: +852 2158 9714