Yahoo Draws Wide Interest
Several potential suitors are emerging for Yahoo's core Internet business, from media and telecommunications giants to private-equity firms, as the beleaguered company weighs whether to put it up for sale.
Among the companies that would likely explore a purchase are Verizon Communications and Barry Diller's IAC/InterActive, people familiar with the matter say. Others might be interested in pieces of Yahoo, if they become available, including News Corp, owner of The Wall Street Journal, and magazine publisher Time Inc, according to executives familiar with the situation.
Private-equity firm TPG Capital has looked at buying media properties within Yahoo, according to a person familiar with the matter.
A Yahoo spokeswoman didn't respond to a request for comment.
Despite Yahoo's struggles, the potential buyers would be attracted to the company's vast reach: Its properties attract more than 200 million monthly visitors in the U.S. each month.
For private-equity firms, the appeal might be that taking Yahoo private would enable a restructuring that would be more difficult in the glare of the public markets. A private-equity firm could, for example, decide to milk Yahoo for cash flow while cutting back on investment.
The board of Yahoo plans to consider significant strategic options at meetings this week, The Wall Street Journal reported Tuesday, including a sale of the core business and whether to spin off its investment in Chinese e-commerce company Alibaba Group Holding, a stake now valued at more than $30 billion.
Yahoo might opt not to sell the core business.
Brian Wieser, an analyst at Pivotal Research Group, said in a research note Tuesday that he values Yahoo's core business at roughly $1.9 billion, not counting cash on hand.
Another analyst, Youssef Squali of Cantor Fitzgerald, had valued it at $3.9 billion, not including cash.
Either valuation would be higher than what Yahoo is currently receiving. Yahoo investors are assigning the core business a value of less than zero, since much of the value of Yahoo's $32 billion market capitalization is tied up in two large Asian assets, Alibaba and Yahoo Japan Corp.
SunTrust analyst Robert Peck said there could be many logical buyers for the Internet business, including Verizon, AT&T, Comcast, Walt Disney, and News Corp.
Anyone who picks up Yahoo's core business would inherit some acute problems. Yahoo's traditional strength, selling desktop display advertising to large advertisers, is in a broad decline. The company, once the first stop for many brands when spending ad budgets online, has been eclipsed by Facebook and Google.
Yahoo is expected to pull in 4.4% of the $58.12 billion U.S. digital advertising market in 2015, according to research firm eMarketer, down from 5.1% last year.
For Verizon, acquiring Yahoo would bolster its growing advertising-technology business. The telecom company already spent $4.4 billion in June on AOL. AOL has specialized in helping third-party websites sell more ads, while Yahoo brings with it a vast pool of registration data and email addresses. The combination of AOL's reach, data from Verizon's wireless business and Yahoo's data might help create a more formidable rival to ad-tech behemoths Google and Facebook.
Yahoo and AOL have been linked as possible merger partners previously. And AOL's chief executive, Tim Armstrong, stayed on at Verizon and could be in position to lead a combined Yahoo-AOL. However, such a deal also would create redundancies. For example, AOL has a video advertising platform, which it built through the 2013 acquisition of Adap.tv. Yahoo purchased a similar company, BrightRoll, last year.
Comcast, likewise, has been building up advertising-technology capabilities through acquisitions of firms such as FreeWheel and Visible World.
For IAC, whose stable of Web properties includes CollegeHumor and About.com -- and which recently hived off its Match online-dating division -- a deal with Yahoo could bring in a high-profile asset with tremendous reach on mobile platforms. Other analysts point to SoftBank Group Corp. of Japan as a contender for the Yahoo Internet business.
The rationale for traditional media companies is less clear. Yahoo still brings in billions in advertising revenue each year, and boasts a sizable sales force.
For a company such as Disney, Yahoo's audience and direct consumer data could be valuable for marketing its theme parks and movies. AT&T could use Yahoo's data pool and match what Verizon is trying to accomplish via its AOL acquisition.