Monday, February 11, 2008
Yahoo Looking East? Land of the Rising Son
So, before we dump the latest speculation in your laps, let's have a brief overview and timeline of the Microsoft bid for Yahoo!Inc., leading up to the current status of the tech titan wars.
Feb 1 2008: Microsoft makes $44.6 Billion dollar bid for Yahoo!
Feb 11 2008: Yahoo! Board rejects Microsoft offer, citing undervaluation and anti-trust concerns.
Feb 12 2008: Microsoft indicates it will not back down, and will go to shareholders if necessary.
And that's where we stand today. Conventional wisdom: Yahoo is bargaining hard to get Microsoft to increase the offer from the original price per share of $31 to somewhere between $35 to $40. Microsoft has both the nerve and the deep pockets to play this high stakes game of corporate poker. Yahoo and Jerry Yang, on the other hand, find themselves increasingly short of options as shareholders and employees begin deserting the ship, and mutiny looms on the horizon. But...
Short of options does not mean devoid of options. The big fella reports NYC rumours of a private equity deal which was quashed by the Microsoft offer. Yahoo (YHOO) was just about to announce a negotiated transaction for the sale of the company to an East Coast private equity firm. Then Microsoft stepped in the way. The rumors of this now pre-empted private bid include the following:
-to be announced as early as February 5th;
-negotiated price was in the $23-25 range;
-some Yahoo! properties to be spun out to shareholders;
So this may have been in the past. Also, as someone in the comments in aforementioned post points out, why would Yahoo! reject a $31 bid if they were ready to accept a $23-25 range bid?
There's also some talk about Google helping to shore up Yahoo's investor confidence with an advertising outsourcing agreement, while leaving the rest of their business alone. Again, this does not wash, beacuse the minute Google comes in to the picture, Microsoft will start ringing the anti-trust bell.
Which rings us again to what we discussed in a previous post. Someone who has a vested interest in Yahoo!, and would like Yahoo to remain Yahoo. If you remember the Countrywide Corp - Bank of America deal, BofA already had $2 billion invested in Countrywide, and when the latter was near bankruptcy, BofA threw in an additional $4 billion to takeover the mortgage business. So, it was a marriage made in heaven, with gains for both sides, and a heavy penalty if the deal had fallen through.
Let's apply the same principle to Yahoo. If Yahoo does nothing, the shareholders will eventually force the Board to accept the MS deal, and Jerry Yang will end up unemployed. So they have to do something. Who has the deep personal connections and even deeper pockets to come up a strategic alternative to the Microsoft offer? Let's look east. Jerry Yang's wife, Akiko Yamazaki, is a Japanese, although born and raised in Costa Rica. And take a look at the Japanese CEO of Softbank Capital and Softbank Mobile, Masayoshi Son, who also happens to be Japan's richest man.
Personal connections? Both Jerry Yang and Masayoshi Son are part of the board of Yahoo Japan, of which Softbank owns a controlling interest and Yahoo! Inc. owns a part. Son also owns a part of Yahoo! Inc., so the financial intermeshing could not be any stronger between the two companies and their CEOs. At the height of the dot-com frenzy, his acquisitions of internet companies had powered Softbank to a value of about $140 billion. His personal net worth today is about $7 billion and Softbank's 6 monthly sales about $22 billion. He has a very clear trail and history of acquiistions and investments in internet companies and he's quite familiar with the big stakes and ups and downs. He knows Jerry Yang personally, serves on the same board and has a significant stake in Yahoo's future. He has also stated, quite explicitly, that Softbank will not be selling it's stake in Yahoo Japan.
Now this is where it gets interesting. Yahoo! has a significant stake in Yahoo Japan. If Microsoft gobbles up Yahoo, that means that Son will soon be chatting with a Microsoft representative who will take Jerry Yang's place in Yahoo Japan's board. And since Son owns a part of Yahoo!, Microsoft's offer will undoubtedly help him cash out his share at a higher value.
While there is no doubt that Masayoshi Son has the capability to put together a coalition of investors who would help Softbank upp it's stake in Yahoo!, while allowing Jerry Yang to remain at the helm, the questions still remain - Does or does not Son want Microsoft sitting in Yahoo Japan's boardroom? He does not want to sell his stake in Yahoo Japan, but does he want to sell his stake in Yahoo! Inc.? I suspect the answers to these two questions will determine whether or not Jerry Yang stays out of unemployment.
Feb 1 2008: Microsoft makes $44.6 Billion dollar bid for Yahoo!
Feb 11 2008: Yahoo! Board rejects Microsoft offer, citing undervaluation and anti-trust concerns.
Feb 12 2008: Microsoft indicates it will not back down, and will go to shareholders if necessary.
And that's where we stand today. Conventional wisdom: Yahoo is bargaining hard to get Microsoft to increase the offer from the original price per share of $31 to somewhere between $35 to $40. Microsoft has both the nerve and the deep pockets to play this high stakes game of corporate poker. Yahoo and Jerry Yang, on the other hand, find themselves increasingly short of options as shareholders and employees begin deserting the ship, and mutiny looms on the horizon. But...
Short of options does not mean devoid of options. The big fella reports NYC rumours of a private equity deal which was quashed by the Microsoft offer. Yahoo (YHOO) was just about to announce a negotiated transaction for the sale of the company to an East Coast private equity firm. Then Microsoft stepped in the way. The rumors of this now pre-empted private bid include the following:
-to be announced as early as February 5th;
-negotiated price was in the $23-25 range;
-some Yahoo! properties to be spun out to shareholders;
So this may have been in the past. Also, as someone in the comments in aforementioned post points out, why would Yahoo! reject a $31 bid if they were ready to accept a $23-25 range bid?
There's also some talk about Google helping to shore up Yahoo's investor confidence with an advertising outsourcing agreement, while leaving the rest of their business alone. Again, this does not wash, beacuse the minute Google comes in to the picture, Microsoft will start ringing the anti-trust bell.
Which rings us again to what we discussed in a previous post. Someone who has a vested interest in Yahoo!, and would like Yahoo to remain Yahoo. If you remember the Countrywide Corp - Bank of America deal, BofA already had $2 billion invested in Countrywide, and when the latter was near bankruptcy, BofA threw in an additional $4 billion to takeover the mortgage business. So, it was a marriage made in heaven, with gains for both sides, and a heavy penalty if the deal had fallen through.
Let's apply the same principle to Yahoo. If Yahoo does nothing, the shareholders will eventually force the Board to accept the MS deal, and Jerry Yang will end up unemployed. So they have to do something. Who has the deep personal connections and even deeper pockets to come up a strategic alternative to the Microsoft offer? Let's look east. Jerry Yang's wife, Akiko Yamazaki, is a Japanese, although born and raised in Costa Rica. And take a look at the Japanese CEO of Softbank Capital and Softbank Mobile, Masayoshi Son, who also happens to be Japan's richest man.
Personal connections? Both Jerry Yang and Masayoshi Son are part of the board of Yahoo Japan, of which Softbank owns a controlling interest and Yahoo! Inc. owns a part. Son also owns a part of Yahoo! Inc., so the financial intermeshing could not be any stronger between the two companies and their CEOs. At the height of the dot-com frenzy, his acquisitions of internet companies had powered Softbank to a value of about $140 billion. His personal net worth today is about $7 billion and Softbank's 6 monthly sales about $22 billion. He has a very clear trail and history of acquiistions and investments in internet companies and he's quite familiar with the big stakes and ups and downs. He knows Jerry Yang personally, serves on the same board and has a significant stake in Yahoo's future. He has also stated, quite explicitly, that Softbank will not be selling it's stake in Yahoo Japan.Now this is where it gets interesting. Yahoo! has a significant stake in Yahoo Japan. If Microsoft gobbles up Yahoo, that means that Son will soon be chatting with a Microsoft representative who will take Jerry Yang's place in Yahoo Japan's board. And since Son owns a part of Yahoo!, Microsoft's offer will undoubtedly help him cash out his share at a higher value.
While there is no doubt that Masayoshi Son has the capability to put together a coalition of investors who would help Softbank upp it's stake in Yahoo!, while allowing Jerry Yang to remain at the helm, the questions still remain - Does or does not Son want Microsoft sitting in Yahoo Japan's boardroom? He does not want to sell his stake in Yahoo Japan, but does he want to sell his stake in Yahoo! Inc.? I suspect the answers to these two questions will determine whether or not Jerry Yang stays out of unemployment.
Subscribe to Posts [Atom]
