According to a report in The Wall Street Journal, bids for Yahoo are expected to come in (or came in) at less than the $4 to $8 billion anticipated by many analysts. Instead, they are more likely in the range of $2 billion to $3 billion, according to the article:
Bidders have lowered their expected prices following weeks of sale presentations by Yahoo Chief Executive Marissa Mayer at the company’s Sunnyvale, Calif., headquarters and its disclosure of data that detailed the company’s flagging prospects.
Verizon is still the favorite to win the bidding, but the WSJ article identifies a number of other suitors in the mix, including TPG, Bain Capital, Dan Gilbert (founder of Quicken Loans, possibly backed by Warren Buffett), Vista Equity Partners and one or two others.
The article attributes the lower bid prices to disappointing first quarter financial results and the perception that Yahoo’s core business continues to deteriorate. It adds that “buyers have in recent weeks had access to a ‘data room’ with nonpublic details about the company’s financial performance and prospects.”
The second round of bids is due the first week of June. This suggests that Yahoo wasn’t entirely satisfied with the first round and/or wants to bring more parties into the negotiations.
If the WSJ is correct, and bids are coming in much lower than expected, that creates a dilemma for the board and CEO Marissa Mayer. Should they accept the offers now or continue with the existing turnaround effort?
In the latter case, there’s a risk of further weakness and revenue declines. But if the board accepts a too-small buyout, it would be an embarrassment, or worse, create legal trouble with existing investors.
Yahoo’s current market cap is just under $35 billion. Back in 2008, Microsoft offered to buy Yahoo for roughly $45 billion.
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