Tag Archives: Yahoo

UPDATE: Since writing this post this morning, Alibaba and Yahoo have announced an actual deal, whose terms are largely the same as those described below. Congratulations to both sides for finally reaching a deal!

It looks like I was wrong in predicting that the latest shake-up at the top of Yahoo (Nasdaq: YHOO) might derail its advanced discussions to sell back some or all of its stake in Alibaba to the Chinese e-commerce leader, with media now reporting that a deal is imminent that looks smart for Yahoo but also somewhat messy. To recap quickly, Alibaba has been trying for more than a year to buy back the 40 percent of itself that Yahoo purchased in 2005 when the 2 sides thought they could become good strategic partners. That relationship never really materialized and the situation became rather acrimonious instead, leading the 2 sides to pursue their divorce with talks that began last fall. After a false start due to unrealistic expectations by both sides, talks resumed a couple of months ago and it looked like the 2 sides might finally reach a deal. But then recently named CEO Scott Thompson abruptly had to resign last week after false claims were discovered in his resume, prompting me to say the departure could derail any progress in the latest buyback talks. (previous post) Now it seems the buyback talks must have been far more advanced than I realized, and that the Yahoo board wants to conclude a deal to give as a present to the new CEO who will eventually fill the spot vacated by Thompson’s abrupt departure. Media are saying that under the deal that could be announced as early as later today, Yahoo would only sell back half of its current Alibaba stake, or about 20 percent of the company for $7 billion, and retain the remaining 20 percent for the moment. Alibaba would then pursue an IPO in the next 18 months, at which time Yahoo would sell down half of its remaining stake, or about 10 percent of Alibaba, into the offering. (English article) Yahoo’s motivation for structuring the deal this way is relatively clear, though it looks a bit messy to me from Alibaba’s perspective. But Yahoo is clearly in the position of strength in these discussions since it’s the one holding the 40 percent Alibaba stake, and thus Alibaba has limited leverage to get what it wants out of a deal. From Yahoo’s perspective, the initial sale of 20 percent will instantly give it a nice cash infusion of $7 billion, and also show the world that its remaining Alibaba stake is worth another $7 billion or more, valuing Alibaba itself at a tidy $35 billion. That could help to quickly boost Yahoo’s laggard shares, which now value the company at just $18 billion, by boosting expectation that the company could soon use its new cash infusion to pay a dividend. What’s more, Yahoo could get more cash for future dividends if Alibaba can boost its valuation by the time of its IPO, which looks likely as the company is China’s e-commerce leader and most of its businesses are quite profitable. From my personal perspective, this deal doesn’t look too attractive since I really think these 2 companies need to get completely divorced, the sooner the better, so that each can move ahead with developing its business without unneeded distractions. But since neither Yahoo or Alibaba is asking me what I think, we’ll just have to proceed with this slow-motion divorce and eagerly await the day when these 2 companies with a stormy past finally complete their separation once and for all.

Bottom line: Yahoo’s imminent signing of a buyback deal with Alibaba looks like the beginning of a long and potentially messy divorce that will mostly benefit Yahoo.

Related postings 相关文章:

◙ Alibaba-Yahoo Buyout: Back to Square One 阿里巴巴股权回购重回起点

◙ Alibaba’s Yahoo Buyback: Deal Finally Near? 阿里巴巴回购雅虎所持股权可能为期不远

◙ Alibaba, Yahoo: The Never-Ending Story 阿里巴巴股份回购“马拉松”再现曙光

When the history books are finally written, the ongoing divorce between e-commerce leader Alibaba and its controlling stakeholder Yahoo (Nasdaq: YHOO) could well go down as one of the longest in corporate history. But unlike the case with most divorces where messy issues like who gets to keep what assets complicates the matter, this case will see Yahoo taking most of the blame for the protracted delays, which have been extended yet again with the sudden resignation of Scott Thompson just a half year after he took over as CEO of the tarnished US Internet giant. (English article) For those who haven’t followed this story too closely, Thompson has been the subject of a tempest-in-a-teapot scandal over the last couple of weeks after a dissident Yahoo shareholder discovered the new CEO had made misstated part of his degree on his resume, claiming a double degree when in fact he only had a single one. Perhaps I’m being too harsh in calling this scandal a tempest in a teapot, as clearly it’s improper to exaggerate on one’s resume. At a more fundamental level, this gaff does seem to highlight the dysfunctionality that seems to be all too common at Yahoo these days, which brings me back to the original point of this posting, namely that this latest development will deal yet another major setback to Yahoo’s long and tortured talks to sell back some or all of the 40 percent stake it owns in Alibaba. To recap briefly, the pair were all smiles when they first announced their union in 2005, with Yahoo buying its 40 percent of Alibaba — now worth more than $10 billion — for just $1 billion. The honeymoon didn’t last for very long, and relations soured considerably under the brief tenure as CEO of Carol Bartz, who repeatedly clashed with Alibaba founder Jack Ma before her abrupt firing last September. (previous post) With Bartz out of the picture, Yahoo started to negotiate a sale of the stake back to Alibaba last fall, but unreasonable expectations by both sides, combined with a lack of leadership at Yahoo later caused those talks to collapse. After Thompson’s hiring, both sides returned to the bargaining table earlier this year, and foreign media were reporting as recently as a week ago that a deal might be just weeks away that would see Yahoo sell 15-25 percent of its stake back to Alibaba. I suspect that Thompson was a major driver of that deal, as he was clearly in control and keen to resolve that issue so he could focus on his much bigger task of returning Yahoo to health. If that was the case, that means that Thompson’s resignation, which has also thrown Yahoo’s board into turmoil, could easily mean the deal being negotiated will now be scrapped. What’s more, the board, which has named an acting CEO, is likely to take at least another couple of months to name a new long-term chief executive, who will then need to get acquainted with the company before relaunching any buyback talks. At this rate, I seriously doubt the 2 sides will be able to reach a deal this year, and the earliest we could see an end to this troubled marriage would be in the first half of 2013.

Bottom line: The sudden resignation of Yahoo’s new CEO will further delay its ongoing divorce with Alibaba, with a deal unlikely until the first half of 2013 at the earliest.

Related postings 相关文章:

◙ Alibaba’s Yahoo Buyback: Deal Finally Near? 阿里巴巴回购雅虎所持股权可能为期不远

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

◙ Yahoo: A Good Time to Break From Alibaba? 雅虎与阿里巴巴分手时机还不成熟

It seemed like a long time since we last heard any updates on Alibaba’s never-ending quest to buy back the 40 percent stake of itself held by faded US search company Yahoo (Nasdaq: YHOO), and now we finally know why: apparently the talks broke down a month ago over a number of issues. But in a show of its determination to dump Yahoo once and for all, Alibaba’s CFO has reportedly flown to the US to meet with Yahoo’s CEO to see if a deal can still be worked out. (English article; Chinese article) Alibaba has been very vocal about its desire to buy back the Yahoo stake for the last 2-3 years, especially during the tenure of Yahoo CEO Carol Bartz, who had a stormy relationship with Alibaba founder Jack Ma before she was fired last year for unrelated reasons. Yahoo had indicated it was also willing to sell the stake as it hired a new CEO with a mandate to return the company’s core search business to health. So the talks were progressing with updates appearing in the media regularly until about a month ago when the issue disappeared. I attributed that disappearance to media fatigue, and assumed a deal would be announced whenever both sides finalized the agreement. But now it turns out the 2 sides couldn’t agree on a number of issues, including breakup fees and price. Another sticky issue reportedly was Yahoo’s insistence in structuring the deal in such a way that would allow it to avoid paying taxes on the huge gain in the value of its Alibaba stake, which it paid $1 billion for originally in 2005 but now is likely to be worth more than 10 times that amount. With so many sticking points, I’m not exactly sure how new talks between the 2 sides are likely to produce any real results unless both are willing to make some big compromises. The fact that they are indeed talking again does seem to indicate that perhaps we will see some such compromises, as this issue is one that both companies would clearly like to put behind them. From Yahoo’s perspective, the Alibaba issue remains a major distraction at a time when new CEO Scott Thompson wants to focus on fixing its core search and web portal businesses. For Alibaba, the company wants to find investors who will give its stock the respect it thinks it deserves and provide support and connections in the run-up to a potential IPO for the group that could come as soon as the next 2-3 years. At the end of the day, both companies want to see this issue settled once and for all so they can move on to more important matters. That said, look for each side to make some big compromises in the weeks ahead, with a 50 percent chance they may finally reach a deal by mid-year to bring this long and frustrating saga to an end.

Bottom line: The restarting of collapsed talks between Alibaba and Yahoo indicate both sides are ready to make major compromises in finally bringing an end to their equity relationship.

Related postings 相关文章:

◙ Alibaba Tests Waters for Group Listing 阿里巴巴试水集团整体上市

◙ Alibaba.com Privatization: Parent IPO Coming? 阿里巴巴网私有化：母公司或将上市？

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧