Today at the China 2.0 conference at Stanford, Alibaba Groups’s Jack Ma replied to a pointed question about buying Yahoo with, “We are very interested in Yahoo. Our Alibaba group is important to Yahoo and Yahoo is important to us … All the serious buyers interested in Yahoo have talked to us.”
Those “serious buyers” most likely include Alibaba Group investor Silver Lake Partners, Microsoft, Hellman & Friedman and Andreesen Horowitz, who have all reportedly reached out to Yahoo’s board.
Is Ma’s interest enough to spark consumer and shareholder interest in Yahoo? “Any and all interest [is] welcome,” one shareholder told me, “but Ma has real smarts.”
On the surface Ma is certainly the type of CEO that Yahoo needs post-Bartz, diplomatic, cunning, and a man of (relatively) few words. But would the deal make sense financially?
Alibaba Group’s recent funding from Silver Lake valued it at $32 billion, while Yahoo is at a 16 billion market cap. With Yahoo’s 40% stake in Alibaba Group valued at $12.8 billion, it seems like 80% of the company’s value is based on its Asian assets. Ma has apparently made it clear that he would like to buy back Yahoo’s stake in his own company, and now he can for a bargain basement $3 billion premium –with hundreds of millions of US users thrown in for good measure.
Is the rest of Yahoo worth $3 billion? Probably. Plus Ma has an additional incentive to buy Yahoo because getting all those shares back frees him from his largest albatross shareholder. It’s a no brainer for Alibaba.
Would the Yahoo board take an offer from Ma? That remains to be seen, as the relationship between the two companies has been notoriously strained, most recently suffering because of accusations of unfair play on the part of Yahoo when Ma transferred ownership of Alipay to a separate company.
The sentiment among the former Yahoo employees I spoke to seems to be that Yahoo is so dysfunctional that they can’t see anything like this happening. And then there’s stigma; the general idea is to sell to someone you’re proud of like Google and Microsoft, not someone you used to own. The cultural fit between the Chinese and American companies is also quite awkward, as Sarah Lacy has documented comprehensively.
Despite this, many shareholders are just hoping for a decent price to exit their long-held positions, and Ma might be the company’s only hope for survival intact, as he is interested in Yahoo in its entirety. This is surprising: Yahoo is the type of company that Richard Gere in Pretty Woman would buy, and then break up — the individual pieces are more valuable than the sum of the parts.
Related: Looking up that YHOO ticker on Yahoo Finance is just depressing.
Image: Mick Orlosky