Reuters has reported that Bain may bid, perhaps with another PE firm, to buy Yahoo! (NASDAQ: YHOO) The offer would be coordinated with two Asia companies in which Yahoo! owns large stakes–Alibaba and Yahoo! Japan.
It is not clear how the buyers would split Yahoo!’s assets. Alibaba and Yahoo! Japan would like to get back the stakes that the portal company owns. There is a theory that if these are distributed to the Asia firms with tax advantages of Yahoo! investors in mind that the total value of Yahoo! could be $20.
The problem that investors face is one that Yahoo! has had for several years. Its cost base is already low, most recently cut by former CEO Carol Bartz. In the meantime, Yahoo!’s revenue has flattened. It faces harsh competition for the display advertising on which it counts for most of its revenue. Facebook, in particular, has taken a huge market share in this advertising segment. It will be hard to increase Yahoo!’s revenues and its margins.