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November 4, 2011 11:16 pm
Yahoo has edged closer towards a potential sale of all or part of the company, entering confidential talks with a number of private equity firms and others that could eventually resolve the uncertainty surrounding the US internet company, according to people familiar with the discussions.
However, one early proposal put forward by Yahoo, involving the sale of a minority stake and leaving existing management in control, has raised only lukewarm interest from investors who have been circling the company, while causing consternation among some of its existing shareholders.
Activist investor Daniel Loeb, chief executive of Third Point, which owns just over 5 per cent of Yahoo’s shares, attacked the idea in an open letter to the company’s board on Friday. The “only purpose would be to put substantial equity stakes into friendly hands to entrench management and transfer effective control without payment of a premium or even, it appears, a shareholder vote,” he said.
Meanwhile, Alibaba and Softbank, Yahoo’s Asian partners, are trying to put together a group of private equity investors of their own to back a full acquisition of the US company, according to one person familiar with the initiative.
The indications that Yahoo has inched forward follow weeks of informal discussions among private equity firms, rival internet companies and others over possible deals involving all or parts of the US company. Yahoo has now signed non-disclosure agreements that will enable it to enter more formal discussions, according to people familiar with the situation.
Some investors had been resisting signing the agreements, which forbid them from discussing joint transactions for Yahoo with others. However, the company has not weakened the restrictive terms, according to one person familiar with the situation. Texas Pacific Group and at least one other private equity firm have entered the confidential talks, along with an unspecified number of others, two people said.
In one idea put to private equity investors by Jerry Yang, the Yahoo co-founder, outsiders would take a minority stake in the company and Yahoo would borrow heavily to buy back shares. Some investors rejected the idea that Mr Yang should play an active part.
“His role as a director and negotiator might present a conflict of interest if he also emerges as a partner with an outsider bidder, Mr Loeb said. “He is simply not aligned with shareholders.”
Yahoo said on Friday Mr Yang’s involvement was being closely directed by its board and a special committee, which had been set to oversee a possible sale or investment. It refused to comment on the proposal to sell a minority stake, but added that it had “a wide range of options under active consideration”.
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