Potential Yahoo Investors Reportedly Sign Nondisclosure Agreements
November 5, 2011

Potential Yahoo Investors Reportedly Sign Nondisclosure Agreements

Multiple parties interested in purchasing Yahoo have signed confidentiality agreements with the Sunnyvale, California-based online company, while Yahoo's shares in Yahoo Japan could be sold off in the near future, various media outlets reported Friday.

According to Nadia Damouni and Alexei Oreskovic of Reuters, company executives had set a Friday deadline to sign the nondisclosure deals in order to look at the company's financial information. However, they added that sources claimed that the deadline could be extended until sometime next week, in the hopes that more companies will sign the agreements.

"Some private equity firms have balked at signing Yahoo's nondisclosure agreement because of restrictions that would prevent them from forming consortiums, people familiar with the matter told Reuters last week," Damouni and Oreskovic said, noting that "at least five of the private equity firms interested in Yahoo had not signed a confidentiality agreement as of Thursday."

Reuters reports that those firms holding out include Silver Lake Partners, Providence Equity Partners, Bain Capital, Hellman & Friedman and Blackstone. Those firms that did sign the deal were not named by Damouni and Oreskovic, but the reporters claim that they had "heavily negotiated its terms," though sources told them that it was "not clear exactly what amendments" were made to the deal.

An informant "close to the process" told Reuters that "multiple parties" had signed the NDAs. The wire service notes that other private equity companies pursuing Yahoo include KKR, TPG Capital, Carlyle Group, and Providence. Sources would not confirm which firms had signed, though a Thursday night New York Times report pegged TPG as one of those who had agreed to terms.

"The signed agreements could help spur private equity firms and others to explore an acquisition of Yahoo's assets, even as Yahoo's board of directors considers alternative plans such as selling a 20 percent minority stake in the company," Reuters wrote in their November 4 article. "Under that structure, the purchaser of the stake and Yahoo's two co-founders -- Jerry Yang and David Filo -- would then increase their combined stake to around 40 percent to 45 percent through a large share buyback that would reduce the number of Yahoo shares outstanding."

"The minority investment plan is one of several options being considered by the board and is an alternative to a sale of the company, people familiar with the matter have said," Damouni and Oreskovic added. "That structure would buy Yahoo time to seek out partnerships with social media companies like Facebook, Twitter and Yelp or move into mobile, allowing Yahoo to turn around the business without having to sell the company."

Such a plan would also allow the company to keep their Asian assets (including 40% ownership of Chinese e-commerce company Alibaba and a 35% percent stake in Yahoo Japan), or potentially dealing those assets separately.

In fact, according to AllThingsDigital's Kara Swisher, a potential sale of that 35% share of Yahoo Japan is the company's "only easy move right now and the one most likely to happen soon."

Swisher, citing sources close to the deal, SoftBank, Yahoo's longtime Japanese business partner, would buy out Yahoo's stake, which had been valued at $6.4 billion on September 30. The money gained from that sale would then either be invested in the business, or paid as a dividend to Yahoo's shareholders.


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