Silver Lake Bids $16.60 a Share for Yahoo Stake

By Brian Womack, Jeffrey McCracken and Douglas MacMillan - Nov 30, 2011 7:47 PM GMT+0700
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Yahoo! Inc. signage is displayed in the lobby at the site of the company's annual shareholder meeting in Santa Clara, California, U.S. Silver Lake is working with Microsoft Corp. and venture-capital firm Andreessen Horowitz to buy part of Yahoo, two people said. Photographer: Tony Avelar/Bloomberg

A group of investors led by private- equity firm Silver Lake offered to buy a minority stake in Yahoo! Inc. for about $16.60 a share, according to people with knowledge of the matter.

That was lower than an offer made by private-equity firm TPG Capital, said two of the people, who asked not to be identified because the bids made this week are private. Alibaba Group Holding Ltd., aiming to buy back the stake in itself owned by Yahoo, is monitoring the situation and may still enter the bidding, another person said. Silver Lake’s offer values Sunnyvale, California-based Yahoo at $20.6 billion, about 6 percent higher than its capitalization at yesterday’s close.

Silver Lake is working with Microsoft Corp. (MSFT) and venture- capital firm Andreessen Horowitz to buy part of Yahoo, two people said. Yahoo, exploring strategic options after ousting Chief Executive Officer Carol Bartz, aims to wrap up the deal by the end of the year, people said.

“The offer is disappointing,” said Hamilton Faber, an analyst at Atlantic Equities LLP in London with a “neutral” rating on Yahoo shares. “Investors who’ve been buying Yahoo recently were hoping for a significant premium and a takeout of the full company, and this falls short on both counts.”

Yahoo directors are likely to discuss offers at a board meeting scheduled for today, one person said.

Yahoo gained 1.3 percent to $15.90 in trading before U.S. exchanges opened, after closing at $15.70 yesterday. The shares had declined 5.6 percent this year before today.

Crowded Field

While Microsoft failed in 2008 to acquire all of Yahoo, it aims to use a minority holding to safeguard its 10-year Web search agreement with the company.

Microsoft, based in Redmond, Washington, forged the partnership under Bartz to provide search technology to Yahoo sites. The deal was aimed at helping both companies vie with Google, the leader in U.S. search-related advertising.

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

Private-equity firm Thomas H. Lee Partners is also considering a bid for Yahoo, people knowledgeable said.

Alibaba Group has said it’s interested in acquiring Yahoo, in part to buy back a stake the company owns. With a holding of about 40 percent, Yahoo is Alibaba’s biggest investor.

Alibaba is waiting to see whether Yahoo’s board will deem the partial-stake bids inadequate and invite it into negotiations to acquire the whole company, a person with knowledge of the matter said. Alibaba is open to acquiring its stake back or making a larger push for all of Yahoo, this person said.

Yahoo aims to strike a deal to sell a minority stake to a private-equity firm by year’s end, the Wall Street Journal reported earlier. Offers for a roughly 20 percent stake came from at least three bidders, the newspaper reported.

Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net

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