KKR, Blackstone Said to Weigh Yahoo Takeover

By Cristina Alesci and Brian Womack - Oct 14, 2011 3:25 AM GMT+0700

KKR & Co. and Blackstone Group LP (BX) are among the private-equity firms considering possible bids for Yahoo! Inc., according to people with knowledge of the matter.

The firms may become part of a consortium that would pool the financing needed, said the people, who asked not to be identified because the review is preliminary and the firms may decide not to make an offer.

The field of potential bidders is crowding for Yahoo, which embarked on a strategic review of its options last month after firing Chief Executive Officer Carol Bartz. Under Bartz, the Web company had struggled to stem sales declines or compete with Google Inc. (GOOG) and Facebook Inc. Any group of buyers likely will need to work with Alibaba Group Holding Ltd., a Chinese e- commerce company whose biggest shareholder is Yahoo.

Alibaba has discussed a plan with Silver Lake and Russia’s Digital Sky Technologies to make a joint bid, people familiar with the matter have said. Another group that is interested in a possible offer includes Providence Equity Partners Inc. and former News Corp. (NWSA) executive Peter Chernin, people said.

Yahoo’s advisers have been fielding inquiries from “multiple parties,” according to a September memo to employees. The advisers view the Silver Lake group and the Providence group as the two likeliest buyers, with Alibaba and private-equity funds joining one of the efforts, a person said.

Dana Lengkeek, a spokeswoman for Sunnyvale, California- based Yahoo, declined to comment. Christine Anderson, a spokeswoman for Blackstone, and Kristi Huller, a spokeswoman for KKR, also declined to comment. Both firms are based in New York.

Shares rise

Yahoo shares rose 1 percent to close at $15.93, rebounding from a decline earlier in the trading session. The stock has dropped 4.2 percent this year.

Acquiring Yahoo won’t be easy. Aside from raising the funding needed for a company with a market value of about $20 billion, buyers must also contend with tax liabilities related to Yahoo’s overseas holdings, people close to the negotiations have said. In addition to having an Alibaba stake, Yahoo owns Yahoo Japan through a joint venture with Softbank Corp. (9984), a Japanese telecommunication company.

Softbank and Yahoo Japan have been in talks with Yahoo to buy its stake in Yahoo Japan for nine months and the negotiations are complicated by tax considerations, according to one person with direct knowledge of the situation.

Microsoft’s Role

Microsoft Corp. (MSFT) may join a group of investors to safeguard its interest in Yahoo and bridge the financing gap a leveraged buyout would require now, one person said this week. Microsoft isn’t anywhere close to making an offer to acquire Yahoo on its own, people familiar with the matter said last week.

Yahoo turned down a $47.5 billion offer from Microsoft in 2008, rankling investors. The two companies later forged a 10- year agreement to outsource Yahoo’s search engine to Microsoft, diminishing the chance of a full acquisition.

Alibaba Chairman Jack Ma has said he’s “very interested” in buying Yahoo, which owns about 40 percent of his company.

Alibaba also has talked with Singapore’s Temasek Holdings Pte about providing financing to buy out Yahoo’s stake, according to people familiar with the matter.

Temasek, a state-owned investment company, may help fund an offer in return for a bigger share of privately owned Alibaba Group, the people said. Temasek isn’t interested in owning Yahoo, one person said. Yahoo’s stake in Alibaba may be worth about $13 billion, using a valuation by the Singapore investor last month.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net