Blackstone Group and Bain Capital appear to be leading the Yahoo sweepstakes as more details of their partnership with China’s Alibaba Group and Japan’s Softbank Corp become known. Behind Alibaba’s incessant quest to take back its 40% stake from Yahoo, Blackstone and Bain would arrange financing for a whole bid that would value the company at around $25 billion. Nothing has been finalized or verified, nor, for that matter even acknowledged by any parties publicly. The speculation is that such a deal would have the inside track with Yahoo investors who seek an outright sale of the company versus a minority stake purchase, the primary difference being the ultimate valuation of the deal, which would bring investors at least $20 per share as a whole versus roughly $16 for a minority stake.
Source: www.reuters.com
Silver Lake Partners has emerged as a key player for the minority interest option which would give it, and other private equity participants a 20% stake with rights of conversion that could boost it to a majority stake. Microsoft is thought to be behind this option as it seeks to protect its technology partnership it has with Yahoo.
While the Blackstone-Bain deal may be gaining traction, the issue of financing begins to loom larger and could be a sticking point in a tightening institutional loan market. At $25 billion, the consortium would need to come up with as much as $9 billion of financing making it the largest leveraged buyout deal in a while. Analysts believe that the current appetite for mega-deals may be no bigger than $4 billion, maybe $5 billion. According to Reuters, Alibaba is seeking to arrange $4 billion on its own against its 40% stake which is said to be worth about $9 billion.
Although Yahoo has yet to publicly acknowledge that it is even for sale, the patchwork of information provided by insiders indicates that the company wouldn’t mind securing a deal before the yearend. Aside from financing issues, the other obstacle for a quick deal appears to be the disagreement among board members and the founder over the future direction of the company and, or its parts. Stay tuned.
