Tuesday, November 29, 2011

Microsoft, Silver Lake, THL: Where to Yahoo!?

By Eric Jackson11/29/11 - 12:00 PM EST
NEW YORK (TheStreet) -- Last night, we learned that Microsoft(MSFT_) is likely to team up with Silver Lake on a leveraged recapitalization bid for 20% of Yahoo!(YHOO_). Also, THL(formerly known as TH Lee) is thinking of making an outright bid for the company.

There have been a lot of rumors floating around regarding what will happen with Yahoo! Let's review the key players and the possible outcomes.

The key stakeholders in this drama are:
Jerry Yang and David Filo. The two co-founders of Yahoo! still own about 9% of the company. Although Yang is the public face of the pair, Filo actually has a much bigger stake in Yahoo! But they typically vote together. They don't want to see their baby dismembered. So their optimal outcome would be to see Yahoo!'s core business undergo a renaissance in the years ahead and returned to its place of prominence in the Silicon Valley hierarchy. Many have guessed that Jerry didn't want to sell the company to Microsoft and wants to be aligned with private equity in order to retain control of his baby.
Capital Research. This big mutual fund headed up by famed media investor Gordy Crawford has been a large investor in Yahoo! for a while. They've also been a public critic at times. Remember when Gordy called for a recount of the 2008 shareholders' vote and we learned that the votes cast against Chairman Roy Bostock and other directors was much higher than what was initially reported. They own 6.8% of the company and would like to see the highest price possible -- even if they have to wait six months instead of two months.
Third Point. Dan Loeb is the newest large shareholder in Yahoo! He's now the second largest shareholder giving him a big voice with the board. He's also gone "activist" with Yahoo!, telling them he intends to push for change if he doesn't see the board acting in his (and other shareholders') best interests. He's already asked for two board seats. It's likely he'd launch a proxy contest in the spring if he didn't think the board was moving fast enough.

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