Yahoo! Inc. (NASDAQ: YHOO) should have had a stellar day with the market up so much and with bidding interest reports. There was even news of a confidentiality pact signature by Microsoft Corporation (NASDAQ: MSFT) a week ago. While not all details are clear, private equity firm Silver Lake has reportedly offered to buy a minority stake in Yahoo! for about $16.60 per share.
So, why are shares flat at $15.71? The answer may have to do with the history of mini-tenders. Companies often start to acquire a public equity and they are fairly free to accumulate shares so long as they do not acquire 10% of the stock, but this may be for a larger stake.
Taking a minority stake may not accomplish what others would hope for in Yahoo! The current market cap is already about $19.5 billion and the $15.70 price of the stock compares to a 52-week trading range of $11.09 to $18.84. That $31.00 offer that Jerry Yang torpedoed sure sounds a lot better now, doesn’t it?
Let’s just assume that Silver Lake got the stake. Whether or not TPG, KKR or others are really interested is still up for debate. Right now, the stock market is betting against that. The private equity firm(s) would likely press for Yahoo! to part with Yahoo! Japan in a sale of some sort as well as to deal with its stake in Alibaba.
Silver Lake, or another interested private equity party, has to consider that Yahoo! is a turnaround masked inside a special situation value stock. Yahoo trades at about 17-times 2012 expected earnings and growth is anemic. The trick is getting the company to unlock the asset value in China and Japan while better targeting a focused company. Ultimately, a company like Microsoft or one of the media companies will have to come into play to acquire the ex-asset Yahoo! to unlock value.
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