In last one year Yahoo has significantly lost its credibility in front of investors as well as market. By Q3 of this year, revenue had dipped by 5% year over year and its net earning reduced by 26 percent. Taking the view of loosing market credibility and share, company is considering to sell bulk of its valuable holdings in Alibaba Group of China and Yahoo’s Japan back to majority owners. Currently, Yahoo holds near about 40 percent of Alibaba stakes and 35 percent of Yahoo Japan. However, it’s been expected that Yahoo might sell only 25 percent of Alibaba stake which is equivalent to $7.5 billion. If Yahoo go ahead with the apparent plan stake sale then it will fetch near about $12.5 billion (combined) which will help Yahoo in restructuring it loss making business model.
Interestingly, few days back Yahoo had signed an undisclosed agreement with Microsoft. Also, independent investors like Silver Lake has bid $16.60 per share for 20 percent of Yahoo shares while TPG offered $17.60 per share few week back. Unfortunately, despite of initial support from board, Yahoo was unable to sell its stake to Silver Lake and TPG. Company was badly criticized by its shareholders as they were worried that sale of stake may dilute their holdings and may not do any value addition by getting in new share holders.
Against the milieu, Yahoo resurrected its talk with Alibaba and Softbank – both of them have submitted their initial proposal to buy Yahoo’s stake in October – three weeks ago. During the negotiation, both the parties agreed to hoist the valuation of the Asian asset and Yahoo clasps on to a small piece of Alibaba ante.
Surprisingly, Yahoo board has not yet dismissed the proposal of Silver Lake and TPG according to some of the sources. After the announcement of Yahoo’s Asian asset sale, its share prices soared by 6 percent. Share price rise directly indicates that Yahoo shareholders are satisfied with its current step to sale Yahoo Asian assets.
Personally, I think Yahoo has taken a significant step to restructure its business which is going through rough patches since last few years. Sales of Asian assets will definitely help Yahoo in strengthening its piggy bank.
Hope, Yahoo should soon come back on track overtaking all hurdles.