Alibaba, Softbank Said to Seek Partners for Yahoo Purchase

By Jeffrey McCracken and Brian Womack - Nov 10, 2011 5:26 AM GMT+0700

Alibaba Group Holding Ltd. and Softbank Corp. (9984) are talking with private-equity funds about making a bid for all of Yahoo! Inc. without the company’s blessing, people with knowledge of the matter said.

Alibaba and Softbank, in an effort to buy back stakes owned by Yahoo, have grown impatient with a lack of progress in direct talks with the company, said the people, who asked not to be named because the negotiations are private.

The Asian companies aim to work with partners that haven’t signed nondisclosure agreements circulated by Yahoo that can make it harder to bid for the whole company, the people said. Yahoo prefers to sell a smaller stake, rather than cede complete control, the people said. Alibaba Chairman Jack Ma has said he’s “very interested” in acquiring Yahoo.

“Alibaba Group and Softbank are willing to buy back their shares soon,” said Tomoaki Kawasaki, a Tokyo-based analyst at Cosmo Securities Co.

Representatives of Sunnyvale, California-based Yahoo, China-based Alibaba and Tokyo-based Softbank declined to comment.

Yahoo fell 5 cents to $15.92 at 4 p.m. in New York, giving it a market capitalization of $19.7 billion. The shares have fallen 4.3 percent this year.

Private-equity firms are reluctant to sign Yahoo’s NDA because it prohibits talks with other funds or strategic partners aimed at forming a larger bid, the people said.

TPG Signs NDA

Yahoo has asked interested parties to sign the NDA to receive management presentations and more access to confidential financial information, said the people.

TPG Capital is one of the private-equity firms that has signed a nondisclosure agreement, these people said. Yahoo continues to negotiate with holdouts to encourage a change of heart, the people said. Microsoft Corp. (MSFT) and Google Inc. (GOOG), Yahoo rivals that have expressed interest in financing a possible bid for the company, have not signed the NDAs, people said.

Yahoo is exploring strategic options and seeking a new chief executive officer after the September ouster of Carol Bartz, who struggled to fend off competition from Google and Facebook Inc. Jerry Yang, a co-founder and Yahoo board member, said last month that the company isn’t necessarily for sale.

Representatives of Mountain View, California-based Google and Redmond, Washington-based Microsoft declined to comment.

Tax Liability

Under one scenario being discussed, Softbank and Alibaba would buy back the stakes that Yahoo owns in the companies, according to the people. The remaining funding needed to buy the Yahoo business would come from a private-equity firm.

In another scenario, Softbank and Alibaba would fill their own funding gaps, one of the people said.

Yahoo has a stake of about 40 percent in Alibaba, the Chinese e-commerce company, and 35 percent of Yahoo! Japan, according to filings with the U.S. Securities and Exchange Commission.

Shareholders would incur a tax liability in certain circumstances, including in the event that Yahoo sells the Asian stakes to a party other than Alibaba or Softbank, according to a person with knowledge of the matter. The Asian companies would likely avoid tax hurdles by making the purchase themselves. That would help each company add to its stake, rather than result in a taxable investment gain, the person said.

The two stakes could equal about $15 billion, said one of these people, leaving a private-equity fund -- on its own or with other partners -- to come up with the remaining money.

The Financial Times reported last week that Alibaba and Softbank are trying to form a group of private-equity investors to back a full acquisition of Yahoo.

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@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